Chipotle: $600m In Lost Sales Just Disappeared

Posted: Jul 06, 2017


Source: Chipotle

Chipotle Mexican Grill Inc. lost $620 million in sales in 2016, the year after a series of foodborne illness outbreaks at its restaurants.

Those sales have all but disappeared.

It’s long been clear that Chipotle’s problems were not to the benefit of its competitors, but data from our newly released NRN Top 100 ranking proves this out. Not only did they not get a benefit, their sales growth actually slowed.

According to our data, Chipotle’s systemwide sales fell 14 percent in its latest fiscal year, which was to be expected.

Qdoba Mexican Eats' system sales during its latest fiscal year increased 8.3 percent, or $62.7 million.

Similarly, Moe Southwest Grill’s system sales increased 7.5 percent, or $48.2 million. Theoretically, at least, both chains were the beneficiaries of Chipotle’s problems.

In both cases, however, the chains’ sales growth represented a slowdown from the previous year.

In the previous year, Qdoba’s system sales increased 12.5 percent, while Moe’s increased 12 percent. If the chains were getting the benefit of a market leader in distress, they would see that growth improve, not weaken.

The Top 100 ranks chains are ranked based on system sales, which is a better analysis of a company’s performance because it takes into account organic sales growth and new-unit growth to get total sales demand for a restaurant.

The inability of those fast-casual Mexican chains to take sales from Chipotle during its down year suggests that consumers’ decisions on where to eat are more nuanced than we might think. People apparently don’t decide to eat fast-casual Mexican before picking Chipotle. They picked Chipotle first. When it ceased becoming an option, they chose something else altogether.

But what did they pick, if not for the chain’s two biggest competitors? Two popular suggestions are Taco Bell, because it is a Mexican chain, and Panera Bread Co., which has locations near Chipotle units. But neither of those are obvious answers, either.

Taco Bell’s domestic system sales increased a robust 6 percent, or $533.6 million in its latest fiscal year. But much like the other Mexican chains, those numbers represent slowdowns from the previous year, when its system sales increased 7.7 percent, or $631 million.

Similarly, Panera Bread’s $4.9 billion in system sales was up 7.3 percent in its latest year, a healthy dose of growth but one that was slower than the previous year, when its sales grew 7.9 percent.

McDonald’s Corp. is another one that has been suggested as benefiting from Chipotle’s problems, and the burger giant did in fact increase its system sales by more than $551 million — accelerating its prior year growth of $390 million. But for a system with $35 billion in system sales, $551 million is chump change, up just 1.5 percent and likely all of it from higher prices.

My theory is that Chipotle’s sales were spread far and wide based on location, not only including big concepts but also upstarts that have been gunning for the chain’s staked-out position on responsibly prepared food.

Or maybe they just didn’t eat out at all — 2016 was a bad year overall, as we all know. So perhaps Chipotle’s customers just stayed home watching Netflix while eating the meal they prepared from a Blue Apron order.

Whatever the reason, in the consumer’s mind, at least, there is no “fast-casual Mexican sector.”

By Jonathan Maze
July 05, 2017
Source: Nation's Restaurant News



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