Dependence On Promotions Will Continue To Affect Chipotle's Pricing

Goldman Sachs’ Karen Holthouse believes continued questions related to food safety suggest that Chipotle Mexican Grill, Inc. CMG's recovery will be slower than anticipated.

Food Safety Concerns Persist

Goldman Sachs’ recent survey revealed only 8 percent of the consumers who had initially reported concerns said food safety would no longer impact behavior.

“We did note an improvement among the bucket most impacted by food safety; however, over a quarter of consumers are still in the bucket. This suggests couponing and messaging to date has been ineffective for a meaningful swath of the population,” Holthouse mentioned.

The survey also revealed there was some improvement in the scores directly related to food safety, with a large number of consumers reporting food safety had not affected their behavior immediately after the incident and did not impact their current behavior either.

Related Link: Food Safety Survey Shows Chipotle Trust Issues Persist

Dependence On Promotions

“The majority of improvement today came out of the ‘much less likely’ to eat there bucket, which would suggest a larger group of consumers that could return/increase frequency given the proper incentives,” Holthouse stated.

However, over a quarter of the respondents still said that they were “much less likely” to eat at Chipotle Mexican Grill, implying that there still was a potentially large number of consumers who have not seen proper messaging regarding changes in procedure.

Impact On Pricing

According to the Goldman Sachs report, “Value scores and willingness to pay more scores continued to move lower, with pay more scores trending towards trough levels.”

The analyst believes this might reflect increasing dependence on promotional offers and/or food safety continuing to impact the company’s ability to price.

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