One special look can get you a bigger portion size at Chipotle, the company’s former CEO Brian Niccol (who now heads up Starbucks) told Fortune in an interview this spring.
But that same nod won’t get you a discount.
In fact, the popular Mexican fast-casual chain restaurant admitted this week to raising its prices to combat inflation.
“For the first time in over a year, we have taken a modest price increase of approximately 2% nationally to offset inflation,” Laurie Schalow, Chipotle’s chief corporate affairs officer, told Fortune in a statement.
The confirmation came following an analyst report dated Dec. 4 by Truist Securities financial group showing Chipotle had increased prices by 2% on proteins at 20% of its restaurant locations surveyed.
Truist Securities also predicted from its scrape of nationwide data that this is “the start of a system-wide rollout” of higher menu prices. “The menu price increase is earlier than we expected, and a positive for the stock, in our view,” Truist Securities analyst Jake Bartlett wrote.
Truist Securities raised the firm’s price target on Chipotle from $72 to $74 based on the findings and believes Chipotle is shifting menu prices higher “from a point of strength,” according to the analyst note shared with Fortune. Since the start of the week, Chipotle shares have risen by more than 5% to $64.89 as of mid-day Thursday.
Although customers seldom enjoy price increases, this could be welcome news for Chipotle, which is going through a transition period following Niccol’s exit and lackluster third-quarter results that were affected by the company’s positioning on portion sizes.
A Wells Fargo analyst took it upon himself to order the same Chipotle bowl 75 times to prove the portion problem at the restaurant chain. Zachary Fadem and his team at Wells Fargo bought and weighed all of the burrito bowls they bought at eight different Chipotle locations in New York City (half were ordered online and half were ordered in person). Their analysis, which was published in June, showed significant inconsistencies in portion sizes among the various ways Chipotle customers ordered their meals.
“While throughput is improving, order consistency remains an opportunity,” the analysts wrote in the note. But Chipotle took heed and started addressing the problem.
“There was never a directive to provide less to our customers,” Niccol said in July. “Generous portion is a core brand equity of Chipotle. It always has been, and it always will be.”
By trying to make portion sizes more consistent among restaurant locations, it cost the company last quarter. But it did help quell social media backlash about dainty portion sizes.
“The benefit of last year’s menu price increase was more than offset by inflation across several items, most notably avocados and dairy, as well as higher usage as we focused on ensuring consistent and generous portions,” Chipotle chief financial officer Adam Rymer said during a late October earnings call.
It’s also a sign that Chipotle is getting its sea legs again after Niccol was poached by Starbucks and replaced by Scott Boatwright, who previously served as chief operating officer and chief restaurant officer at the chain. Following Niccol’s departure, shares of Chipotle tumbled, but are now up by more than 47% year over year.
“We know that portioning is a core equity of ours in the organization,” Boatwright said during October earnings call. “We are committed to ensuring that we give the right portion to every guest that walks into the building.”
