Tasteless “South Park” jokes about Chipotle aside, it's a fast-casual operation that's drawn a lot of fans. So much so, in fact, that one single menu change may have pumped the share value up substantially. As of this writing, Chipotle shares are up 2.49 percent thanks, at least in part, to word that Chipotle (NYSE:CMG)
has pivoted on the move to get rid of carne asada as an option by December.
Now, the newest reports suggest that carne asada may not just be hanging out for the holidays, but rather sticking around permanently as a menu option. It's poised to join chicken, steak, pork, and a host of other veggies as part of the full Chipotle lineup, and that's got diners—and investors—cheering.
Playing to Your Strengths Pays Off
So what prompted the move? As it turns out, Chipotle seems to be playing to an obvious strength. Diners hit the carne asada button so hard that Chipotle's supply began to dwindle, and some took to anxious whispering that the already-limited promotional offer would be even more limited.
Realizing that the company had a hit on its hands, Chipotle began a frantic search for a supplier who could keep the company in carne asada while meeting its stringent standards, what the company itself calls its “food with integrity
” program. The program calls for such things as specific kinds of soil vegetables should be grown in, the kind of environment animals should be raised in, and the like. Chipotle prefers, for example, its pork provided from “...pigs allowed to freely root and roam outdoors or in deeply bedded barns.”
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Redundant? Not Hardly
Chipotle fans—and casual observers—may have already noticed that the company offers steak on its menu already, so why offer carne asada? That's just steak also, some will likely note. There are a couple of important differences, however, that light a fire under diners who go with carne asada.
First, there's a bit of a quality difference between the regular cube-style steak offered and the strip steak that makes up carne asada. It's along the lines of a different cut. What's more, the carne asada gets a little extra handling, seasoned with a mix of cilantro, lime juice, and other spices that give this steak a completely different flavor profile. It's also a little more expensive than the standard steak, costing an extra $0.50 per order.
It's that combination of the new cut and further spicing those likely prompts diners to pick up a burrito, bowl or taco with the new, tastier steak option, and that's already burned off a hefty chunk of Chipotle's supply.
Not Just Menu Changes
Chipotle isn't just upping its steak game; it's improving the customer experience in other ways as well. Reports as far back as last February point to Chipotle looking to open up thousands of new “Chipotlanes,” as they're called, which are just drive-thru options for Chipotle customers. Additionally, further reports call for more improvements to the Chipotle app, which already boasts a mobile payment function thanks to an Apple Pay connection.
Chipotle exists in a very tight market space overall; the fast-casual dining space has a lot of competitors out there vying for their share of the market pie. While it's easy to dismiss comparisons between, say, Chipotle and Applebee's, it's still effectively part of the same larger market, the market of people asking “What am I gonna do about dinner tonight?”. Chipotle also has more direct competitors in places like Qdoba or Moe's Southwest Grill.
Therefore, it's vital that Chipotle find ways to distinguish itself from the competition in all stripes. It can't tell diners who want carne asada it's just not there anymore. By doing so, it would not only lose an edge on its competitors, but it would also potentially hand a whole new edge to those same competitors by letting them offer a product that has already been demonstrated as a success. The competitors may still follow suit, but they'll be following, not leading.
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