Pricing Strategy Of Chipotle

Introduction

The restaurant industry in the United States had annual sales of $ 631.8 billion and employs 12.9 million people in 2012. Even in times of recession there is little evidence that this industry has seen a decline especially in its fast food and quick service segment. But with a depressed economy with no immediate upward trend in the near future, majority of the customers indicated that they would either curtail their spending on eating or best maintain its current level which is certainly going to affect the future of many restaurants in the industry. Chipotle is part of the fast casual segment of the U.S industry with over 1,600 restaurants.

Chipotle Mexican Grill was founded by Steve Ells in 1993 and had its first restaurant

With its mission statement of “Food with Integrity” Chipotle has seen success over the last decade. But with the increase of raw material input increasing, Competitors using pricing strategy to compete for its market share and the economic Chipotle is facing some though decision on if it should continue with its “Food with Integrity” which it can ill afford in these difficult times.

In this paper, we will try address ways in which Chipotle can reposition its efforts to focus more on this unique offering without affecting their “Food with Integrity” Concept. By doing so, we believe that it can capture the important and growing segment of customers who are the health-conscious, organic-friendly consumer. And achieve as a result, the growth for its brand, market share, and sales

-Low threat of new entrant ( High input costs ) Threats

-Input costs are increasing and fluctuating (beef price is rising and some ingredients such as wheat price is fluctuating) -All the restaurant’s segments are competitors and are not only competing at their own segment but also with other segments (e.g. Chipotle Competes with meals prepared at home as well as frozen or packaged food items available in supermarkets)

-People reduce eating out spending economics recession and this might affect Chipotle

-Competitor’s pricing strategy – competitors such as Taco Bell are offering similar products with reduced prices to compete for Chipotle’s market share

-High threat of substitute fast food ( variety of choices for consumers)

Situational Analysis for Chipotle

Alternative Actions and Evaluation of Alternatives

Alternatives Pros Cons

1. Differentiation Strategy by “ Food with Integrity”

( current Strategy) -Differentiate from competitors

-Get more attraction because of unique style of serving -Rising food prices

-Need for more produce as raw material inputs

-Low awareness than other brand due to their marketing style of loyalty and word of mouth