Happy Mouth

July 7, 2021: Chipotle’s Avocado Shortage

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Would you like to add guac to that? If so, your Chipotle burritos and bowls could cost a little more thanks to an avocado shortage.

On this episode of the Happy Mouth podcast, chef Nyesha Arrington and restaurateur Philip Camino talk about the avocado shortage, what’s causing it, and how that’s having a massive impact on the fast-casual restaurant’s menu and stock prices.

Listen to Philip and Nyesha discuss the avocado shortage:
  • According to Chipotle CFO Jack Hartung, the company has “diversified” its avocado sourcing to counteract any seasonal shortages
  • Chipotle’s tip avocado suppliers come from Mexico, Peru, and California
  • Mexico is the top supplier but regularly ships fewer avocados during the hot summer months, typically offset by an increase in production in Peru
  • California steadily supplies about 12% of the overall avocado supply
  • Avocados make up between 5%-10% of Chipotle’s ingredient costs, which can have massive impacts on the company’s margins and stock prices
  • The Hass Avocado Board is projecting a 5.8% decline in third-quarter avocado sales compared to the same time last year, which will make it more costly for Chipotle to make its guacamole
  • Avocado prices have been up-and-down in 2021, seeing a 26% decrease in prices in the first quarter due to an influx of shipments from Mexico
  • By the second quarter, avocado prices jumped up 4% and have increased another 6% already in June
  • Chipotle has been facing the worker shortage head-on, looking to attract 20,000 new employees, increasing wages to $15-per-hour by the end of June and introducing referral bonuses of up to $750 per hire
  • The company has already raised menu prices by about 4% to offset increased wages but could need to raise prices again due to the avocado shortage
  • Rising avocado prices have already impacted Chipotle’s stock earnings, knocking it down 10-12 cents per share in the third quarter already
  • However, shares of Chipotle (CMG) are up 5% this year so far, creating a market value of $42 billion for the company

    • Links:

    Happy Mouth Podcast Instagram

    CNBC - Falling avocado shipments could hurt Chipotle’s margins, analyst says

    CNBC - Chipotle hikes prices to cover the cost of raising wages

    Market Watch - Chipotle could take a hit from higher avocado prices

    CNBC - Chipotle to hike wages, debut referral bonuses in attempt to hire 20,000 workers

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    Restaurant Marketing School

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    Happy MouthBy Philip Camino & Nyesha Arrington
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