Chipotle hints at a price increase

As cheaper rivals elbow in, the burrito chain may risk a price hike to counter higher food costs.

By Aimee Picchi Jan 18, 2013 3:19PM

Credit: GUS RUELAS/Newscom/RTR
Caption: File photo of Chipotle Mexican Grill in Beverly Hills, Calif.One of America's favorite burritos might cost more later this year, as Chipotle Mexican Grill (CMG) is considering raising prices to cope with faster-than-expected food inflation. 


The chain of 1,350 burrito restaurants "won't rush" into the decision, the company's chief financial officer Jack Hartung said on Thursday, according to the Wall Street Journal.


The problem? Fresh ingredients -- a point of pride for the chain -- are becoming pricier and may eat into profits, the company said this week.


The move comes at a risky time for the 20-year old chain: Taco Bell recently rolled out a similar menu at a much cheaper price than Chipotle's. 


Yum Brand's (YUM) Taco Bell last year introduced the Cantina Bell menu, which includes a premium burrito with black beans, guacamole and citrus-herb marinated chicken or beef for less than $5. Chipotle's average meal, meanwhile, costs about $9. 


With ingredients such as cilantro-lime rice and naturally raised pork, Chipotle spends about a third of its sales on food costs. That's jumped about 1.3% in the past year because of the rising price of food, the company said on Tuesday. 


The price increase would come after the chain looked at other ways to wring more efficiencies from its operations, the Journal notes. For instance, it's sped up food assembly and uses hand-held devices to take orders while customers are in line, but analysts say Chipotle has maxed out its order-processing capacity. 


While the chain continues to grow, its stock price has declined 18% in the past 12 months. The shares took a hit when the company missed second-quarter same-store sales growth last year, and then saw another drop when hedge fund manager David Einhorn recommended selling it short.


Einhorn asserted that Chipotle was losing customers to Taco Bell, which Chipotle disputed, according to the Journal. But with many people still feeling pinched by the economy, Chipotle might risk losing some customers if its burritos seem more like an indulgence than a moderately priced meal.


More on Money Now

19Comments
Jan 18, 2013 4:54PM
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"Got along without em before I met em - gonna get along without em now"  Chipolte is okay now, higher prices not so much.  Sorry
Jan 18, 2013 5:19PM
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Buy food and cook it yourself at home; it's better and not hard to do. Chipotle; cut some of the pay for your higher execs and do a better job of sourcing food to keep costs down. I only eat at this place once every several months so it won't affect me.
Jan 18, 2013 8:17PM
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They have lost my business because they rush you through the line so fast, you never end up with the same thing twice.  They slop on beans and salsa and the fixings however they feel and tend to skimp as of lately.   If they took some time to listen to requests and make your food less haphazardly they would probably have more business.
Jan 18, 2013 5:02PM
Jan 18, 2013 6:35PM
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At least they're raising prices according to the rise in price of fresh food, instead of whining about "Obamacare costs us too much" like some other restaurants.
Jan 18, 2013 8:27PM
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They already charge to much as it is, and they want to raise prices?  I'll never go there again!
Jan 18, 2013 8:22PM
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Honestly for the life of me I don't understand the following that Chipolte has. I feel they are the Olive Garden of the Taco world, salty salty salty.



For the lucky few that have a Moe's Southwest Grille in their area check em out they're the best of taco/burrito franchises. 
Jan 18, 2013 8:15PM
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They are too high as it is being that they have limited toppings. Freebirds will just take the rest of their business.
Jan 20, 2013 9:10PM
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Their prices are right now at the point I'd consider not going there if they raise them again.
Jan 18, 2013 6:37PM
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They can close there doors for all I care.  They  try to cater to the rich.  All of there stores in Atlanta are in the Northern suberbs.  I guess they are scared to put one near the busiest airport in the nation.
Jan 18, 2013 8:07PM
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Don't even compare Taco bells burritos or bowls from Chipotle, Chipotle has way better quality meat and freshness. i do not care if prices are higher I will keep going there.
Jan 20, 2013 5:09PM
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Chipotle used to be OK. However I have stopped eating there for a while now because they have started skimping on the meat and vegetables. The vegetarian option is a rip-off, all they add is a ton of onions over beans and a few bell peppers and it is only 25 cents cheaper than the meat options. If you have a Q-doba where you live, try that instead. I loved Q-doba, they added grilled eggplant, mushrooms etc to their vegetarian option. Chipotle is no longer worth the price.
Jan 18, 2013 4:47PM
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Isn't this the same Chipotle that was fined "mucho dinero" for hiring illegal workers?

 

I wouldn't mind if they go out of business, actually

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