Here’s How The Negative Response To Its Queso Launch Can Impact Chipotle
Chipotle Mexican Grill (NYSE: CMG) is struggling to grow customer traffic after the E. coli virus hit its restaurants in 2015. While the company took several measures to assure customers about its strong food safety measures post the event, another recent isolated incident of norovirus shook its fragile reputation further. The company has been banking on menu innovation and the much in demand queso to bring customers back to its stores. Chipotle took a while to introduce queso in its menu since this dip is difficult to prepare with only natural ingredients. The company does not use any artificial ingredients in its products, which is one of its strengths. It finally introduced a “natural queso” which does not seem to have gone well with its customers. Consumers are used to a smooth creamy queso and Chipotle’s natural version, which is chunky since it does not use any artificial ingredients, has not gone down well with several customers. The company is in dire need of a boost — a menu item or add-on which attracts customers to its stores despite the virus concerns — and queso was expected to be that menu item. If this product does not meet customer expectations, it could impact customer traffic at its stores negatively, leading to a negative impact on the company’s valuation.
According to our estimates, the average number of visits per Chipotle restaurant per year will increase from around 187,000 in 2017 to nearly 212,000 by the end of our forecast period:
See Trefis Forecast For Average Number Of Customer Visits Per Chipotle Restaurant Here
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Queso is one of the key menu items which is expected to boost Chipotle’s revenues by attracting customers and leading to repeat customer visits. However, if this “natural version” does not meet customer preferences, the company might face declining traffic impacting its valuation negatively.
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