By Heather Haddon | April 21, 2024 7:00 am ET | The Wall Street Journal
The burrito chain outperforms restaurant rivals with customers who tend to have higher incomes and be health conscious. Chipotle fans have been tested lately.
Chipotle Mexican Grill CMG 1.28%increase; green up pointing triangle has increased prices six times since 2021. It was among the first restaurant companies to say it would boost its menu prices on delivery apps. And its prices are set to rise further in California, where roughly 400 locations are paying higher hourly wages in response to a new state law.
Higher costs and inflation-weary consumers are starting to erode sales across much of the U.S. restaurant industry. Traffic last year, while 1% higher than in 2022, remained 8% below prepandemic levels, according to market research firm Circana.
Many Chipotle customers, though, are still willing to pay. The California-based chain’s same-store sales grew 8.4% last quarter, outpacing rivals including McDonald’s and Starbucks’s U.S. operations. Chipotle has reported better-than-expected earnings for four straight quarters, according to FactSet. It is one of the industry’s fastest-growing chains, with plans to build around 300 new locations this year.
Chipotle’s stock has rocketed 59% in the last 12 months, while an S&P 500 subindex of U.S. restaurants was flat.
Chipotle is benefiting from a unique base of customers who tend to be more affluent and health-conscious than the average restaurant-goer—and loyal, executives and analysts say. More than half the chain’s customers say they actively manage their health, according to market research firm Numerator, and they tend to eat out several times a week.
“More than half of our customers are millennial or Gen Z,” said Chris Brandt, Chipotle’s chief brand officer. “Our target audience prioritizes overall wellness.”
Some regulars say the chain’s customization-friendly assembly line model lets them tailor burritos and bowls to their diets. Others say that despite the rising prices, Chipotle remains a better overall value than fast-food burgers.
Professional clientele
Christopher Florentino has been eating Chipotle since high school. Now, the 24-year-old accountant frequents a Market Street Chipotle in San Francisco and other city locations for his preferred chicken al pastor bowl.
It’s a meal he says he can get in minutes at a price that compares favorably with fast food. “In the kingdom of quick eats, Chipotle sits at the throne,” said Florentino, who added he works out four to six times a week, early in the morning or sometimes late at night.
Prices to eat out in March were 29% higher than the same period in 2019, according to Labor Department data released this month. Restaurant industry executives are bracing for a harder year as consumers, particularly those with lower incomes, pull back on spending.
Chipotle’s customers are 20% more likely than the average U.S. consumer to earn more than $125,000 a year, according to Numerator data from its panel of 150,000 U.S. households. Fast-casual chains typically charge more than fast-food and tend to attract higher-income consumers, along with families with children, market research firms said.
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