Company Profile
Founded
Chipotle Mexican Grill (ticker: CMG) is a Mexican-style chain restaurant brand originated in the United States. The company was established in 1993. In 2022, the company’s revenue will be about 8.4 billion U.S. dollars and its net profit will be 800 million U.S. dollars. It is the fourth largest listed catering company in the world. Chipotle operates 3,182 directly-operated stores, most of which are in the United States.
Brand Positioning
Chipotle Mexican Grill is positioned as casual fast food. It not only has the characteristics of fast serving and high cost performance of fast food, but also has the high-quality and customized experience that can only be obtained by restaurants.
Main meal
Consumers need about $10 for a meal at Chipotle Mexican BBQ. Within this budget, consumers can choose burrito, bowl, taco, etc. The staple food is a large single product, and then choose protein, grains, beans, vegetables, sauces on this basis, and finally customize the combination you like.
Where is the competitiveness?
Fueled by Two Trends
First of all, the millennials in the United States have doubts about the health of fast food such as hamburgers based on frozen ingredients. Frozen food began to be widely used in the fast food industry in the United States. Many consumers worried about the loss of nutritional value of frozen food and the impact of freezing on the taste and quality of food. Consumers want to find options that are better than fast food, but with better price and convenience than regular restaurants.
Another trend is the growing audience for Mexican-style cuisine in the United States. Burritos became a new dining trend in California in the 1970s and 1980s. For U.S. consumers, Mexican food represents health, and its recipes contain more vegetables and protein than the American diet. Therefore, Mexican cuisine has also been sought after by quite a few healthy people, accounting for 9% of the fast food market in the United States.
Selected high-quality ingredients
The company believes in food with conscience (Food With Integrity) as the principle of commodity procurement, and strives to change people’s thinking about fast food restaurants. It insists that the source of ingredients must adhere to a certain quality, and meat ingredients cannot be treated with antibiotics or hormones. For example: they buy The pork should be released to the wild pigs, hoping that the pigs will be happy when they are alive.
The 2014 annual report mentioned that there was a pork supplier who was terminated by the company because the pig house was too small. Therefore, for a while, one-third of their restaurants could not serve the Mexican stewed pork dish. Vegetables should also be purchased from reputable family farms as much as possible, to reduce carbon footprints by purchasing nearby, and to purchase organic ingredients as much as possible. the
The company said: It is really difficult to achieve full organic, but they try their best. If they use machine-modified ingredients, they must disclose the information to consumers so that people can decide whether to eat it. If local good ingredients are not easy to obtain, they would rather give up.
Adhere to organic, reject genetic modification
Chipotle Mexican BBQ takes conscience food as the principle of commodity procurement, and insists on sustainable growth and organic cultivation/breeding of animals, land, and crops. Raw material supply Most of the ingredients are organic ingredients picked directly from the farm. The ingredients are not frozen during transportation, and artificial synthetic seasonings are not used in processing. Most of the brand’s chicken, beef, and most grains are organic and farm-sourced. In 2015, became the first national restaurant chain in the United States to completely remove genetically modified organisms (GMOs) from its supply chain.
Meet customized needs
Through the ingenious combination and changes in the product structure, it is simple and rich, and provides consumers with the fun of customized collocation. Consumers can have more than 100 customized combinations in Chipotle Mexican BBQ, and choose what they want from 5 major staple foods, 5 types of proteins, 4 types of grains/beans, and more than 10 types of sauces. This wide range of collocations allows Chipore Mexican BBQ to have a wide range of customers, and also ensures the frequency of repurchases. But behind the customization, the raw materials of Chipotle Mexican BBQ are reduced to only 53 kinds. In contrast, McDonald’s has 60-70 SKUs, and only one Big Mac uses nearly 70 kinds of raw materials.
Efficient Operations Management
In the dining mode in the front hall of the store, the ordering form of the assembly line is adopted. Consumers choose the meals they want according to the link. The efficiency of the “assembly line” model is especially reflected in the peak hours of dining. A store can serve up to 300 people per hour, which is equivalent to only 10 seconds for each employee, which is much higher than the 2-3 minutes of traditional fast food. There are about 16 full-time and part-time employees in the kitchen. The same McDonald’s stores require 20 to 30 employees.
Due to the high management difficulty brought about by the store’s on-the-shelf system and the fresh food supply chain, the company insists on the full direct operation mode. But these characteristics have also built a better brand mentality for the company. For example, the staff at the front desk have high service quality, can communicate skillfully with consumers, and promote consumers’ understanding of store ingredients.
Food safety
Food safety is the top priority in operations, and it is also the biggest difficulty for fresh food stores. The difficult supply chain and operational requirements behind fresh food ingredients have raised the entry barriers for other competitors. The company has also paid a heavy price for this.
However, the food safety crisis that broke out in 2016 made the company face severe challenges – the company’s same-store revenue plummeted by 25%, and the stock price fell from the highest price of US$759 to US$400. This crisis has also become an opportunity for the company to transform and upgrade its management system.
Persevere and reform
Management team replaced
In 2018, after taking office, the new CEO Brian Niccol made two adjustments on the basis of insisting on maintaining brand equity: on the one hand, he consolidated brand management and improved operational efficiency; on the other hand, he transformed the multi-channel model to acquire incremental customers.
Direct operation are no franchise
The company adheres to the principle of refusing to open franchising, all branches are directly operated, and franchising is not open, because the company does not want to compromise the core value insisted on by growth or profit pressure.
It did not consider globalization too quickly, but deeply cultivated the local market, with the priority goal of covering 7,000 stores in the United States.
Deny McDonaldization
Reject the shareholder McDonald’s suggestion of “adding breakfast/package products”, do not introduce raw materials for frozen products, and maintain the original value image of the brand. These measures have further stabilized the value positioning of the company’s brand in the minds of consumers and kept a loyal customer base.
Digitization
Promote digital reform, achieve multi-channel expansion, and greatly increase the output of a single store. The company vigorously popularized the Chipotle APP, encouraged users to pick up or place orders for takeaway, and optimized the SOP for online order delivery. The company’s stores will also process online and offline orders separately. Online orders are directly processed by the back kitchen, which shortens the meal delivery time by 40%. The company’s multi-channel model allowed the company to maintain positive growth during the epidemic, and the proportion of online orders increased from 9% to 49%.
Drive-thru Chipotlane
In addition, Chipotlane, a drive-thru pickup model, is also launched, and the store efficiency of this model is 28% higher than that of standard stores. Through this series of channel reforms, the company’s store revenue will increase from US$2 million in 2018 to US$2.8 million in 2022.
Chipotle related content in my book
I introduced the company Chipotle Mexican Grill in my book, and the content in the book will not be repeated. Investors are invited to refer to the introduction in the special section of my book:
- In the 3-5 subsections of the book “The Rules of 10 Baggers“, the introduction on page 158.
Competitors
Arranged in order of the annual revenue of each company, the following are the main competitors of Chipotle Mexican Grill:
- Starbucks (ticker: SBUX): See my other previous post dedicated to this company, “How does Starbucks make money? and the current predicament“
- McDonald’s (ticker: MCD)
- Yum! Brands (ticker: YUM): See another of my previous posts devoted to this company, “How does ubiquitous Yum! Brands make money?” , especially Taco Bell under the Yum Brands Group, is in every respect a direct competitor to Chipotle’s Mexican Grill.
- Darden Dining (ticker: DRI)
- Burger King’s parent company Catering Brands International (ticker: QSR)
- Domino’s (ticker: DPZ): See my other previous post dedicated to this company, “How does Domino’s make money? its stock reward beat down Alphabet“
- Subway (unlisted)
Capital market performance
Stock performance
As of 6/8/2023, the market value of Chipotle Mexican Grill was as high as US$55.81 billion, with a price-to-earnings ratio of 54.72. The company’s market value has increased by 47 times (4,693.60%) since its listing in 2006.
Valuation Comparison with Key Competitors
| Company | Share price | Market value | P/E | Dividend yield | Stock performance in past 5 years | Stock performance since IPO |
| Starbucks | 97.72 | 112.26B | 31.74 | 2.17% | 73.00% | 28,700.00% |
| McDonald’s | 281.9 | 205.81B | 30.26 | 2.16% | 66.89% | 12,050.86% |
| Yum! Brands | 132.44 | 37.09B | 31.07 | 1.83% | 59.22% | 2,334.56% |
| Chipotle Mexican Grill | 2,022.90 | 55.81B | 54.72 | 0% | 346.18% | 4,693.60% |
| Darden Restaurants | 164.4 | 19.88B | 21.46 | 2.94% | 79.77% | 2,522.01% |
| Restaurant Brands International | 72.98 | 22.72B | 22.34 | 3.01% | 3.38% | 106.10% |
| Domino’s Pizza | 297.56 | 10.52B | 22.90 | 1.63% | 10.19% | 2,051.55% |
Related articles
- “Chipotle Mexican Grill, a new generation of fast-casual food that performed surprisingly well“
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- “How does ubiquitous Yum! Brands make money?“
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