Dive Brief:
- Chipotle has a significant value advantage over some of its close fast casual rivals, according to a BTIG survey of locations in 17 cities. Its core entrees average $10.31, or about 30% to 40% lower than offerings at rivals like Sweetgreen and Cava.
- BTIG analyst Peter Saleh found that chicken entrees, which account for 60% of Chipotle’s orders, average around $9.60.
- As QSR brands improve value menus or cut core menu prices, Chipotle may have a chance to emphasize pricing in its marketing to the detriment of its competitors, Saleh said.
Dive Insight:
The analyst firm found the average price at Cava was $13.47, while Sweetgreen charged $14.58 on average for entrees. Chop't Creative Salad entrees fetched an average price of $13.31. Chipotle’s chicken has a pricing advantage ranging from about 34% against Sweetgreen to about 28% for Chopt.
When Chipotle customers add guacamole, which costs on average $2.81, the value advantage almost entirely disappears.
“Including guacamole, the average price of $13.12 at Chipotle places CAVA just 3% higher, Sweetgreen 11% higher, and Chop’t just slightly above by 1%. We estimate that about 50% of Chipotle transactions include guacamole,” Saleh wrote.
Sticker price does not equal value perception, however, and Saleh wrote the chain “is being punished by consumers for the poor value perception across the quick-service and fast casual segment.”
Chipotle teased value-focused messaging on its most recent earnings call, with CEO Scott Boatwright saying the chain’s pricing was “often below comparable meals at many quick service restaurants. Going forward, we will roll out new and creative ways to emphasize our value proposition.”
Boatwright told analysts the brand needed to find a way to communicate its price point and value proposition and that Chipotle would attempt to play up value in the back half of the year.
Saleh noted that the company’s recent messaging has included some emphasis on price.
“[This is] the first time we can recall Chipotle referencing a specific price point in its advertising in all our years of coverage, and we believe that Chipotle can do much more to highlight its value proposition,” he said.
Chipotle’s same-store sales have fallen for two consecutive quarters. Competitor Cava has managed some growth, but Sweetgreen has seen significant declines. If Chipotle is able to convince consumers of its value proposition, that could help it ward off competition from other fast casuals or preserve share as consumers trade down to QSR.
Saleh said the $10 price point was something few of Chipotle’s fast casual peers could match. McDonald’s recent changes to its core pricing have aimed to make its combo meals cheaper, and CEO Chris Kempczinski noted the $10 price point as an important psychological upper bound for many consumers. If the leading fast casual and QSR brands can use pricing as a cudgel, smaller brands or brands with less ability to withstand margin compression from pricing cuts and value plays, could face significant pressure.
