In this Market Foolery podcast segment, host Mac Greer and the Motley Fool Supernova and Rule Breakers duo of Aaron Bush and David Kretzmann discuss the big news in the fast-casual restaurant space. Chipotle Mexican Grill (NYSE:CMG) has finally given its customers the new menu item they have most requested: queso. The company is in serious need of a PR win, and melted cheese would be the ideal way for it to get one. David reviews the queso on a taste basis, and the team ponders why the promotion seems so lacking.
A full transcript follows the video.
This video was recorded on Sept. 13, 2017.
Mac Greer: Guys, as advertised, our final story, queso, as in Chipotle now has queso as of Tuesday. David Kretzmann, I know you have tasted the queso.
David Kretzmann: Oh, yes.
Greer: What's the review?
Kretzmann: I ordered online and went in to pick up my order. I noticed at least one other customer picking up queso. So the word is getting out. But before I get to the review, I'll say one thing that I'm a little surprised-slash-disappointed with as a Chipotle shareholder and fan. Full disclosure, I probably eat at Chipotle two or three times a week, so I'm a regular. And even throughout all the E. coli stuff, that did not phase me at all. If anything, the shorter lines helped. But the one thing that surprises me here is, Chipotle hasn't done any promotion or publicity about this nationwide queso launch.
Greer: Why is that?
Kretzmann: The main legitimate reason that I could give the company some leeway for is if they just want to do a soft rollout initially, make sure they have everything operating smoothly. But this is a time when Chipotle really needs to get traffic back in the stores. This is, from management's own words, the most requested menu item for Chipotle that they didn't already have on the menu. So when you first need people to come back into the stores, you finally launch a product that people have been asking for, and something that will really help differentiate Chipotle, or at least attract people back into the stores, if nothing else than out of curiosity, to try it out. But there's nothing on Chipotle's Twitter, nothing on their Facebook, they didn't send out any text pushes. Even on their online ordering app, the mobile app, there was nothing about queso on there. So unless you're actually going through and putting your order together piece-by-piece online, there was no way you would know that Chipotle is now offering queso.
And to me, that's a problem. I think this is a great opportunity. I would hope, within the next week or so, they do start making a bigger push. It just seems like a no-brainer.
Greer: That makes no sense to me. If we as Americans can agree on any one thing, I'd like to think it's probably queso, right?
Kretzmann: I mean, yeah.
Aaron Bush: Probably.
Kretzmann: At least people would be curious to try it out. And Chipotle desperately needs people just to get back into the stores. And that's one of the reasons I thought this could be something that Wall Street is underestimating, because Chipotle had hinted that they would do this national rollout in September. And as far as something to get people back into the stores, forget about the E. coli stuff, forget about the rats in Dallas, and forget about the norovirus --
Greer: Already forgotten. [laughs]
Kretzmann: Queso! Queso is the dominating story here.
Greer: OK, let's get to the queso. You're in Chipotle now, and you've got the queso. Take me through it. I need to know about the chips and the queso and your first reaction.
Kretzmann: Yeah. I took it to go, brought it back home, and first thing I did was dip the chip into the queso. And I really liked it. It stays true to Chipotle's mission of using simple, whole ingredients. When you compare the ingredients of Qdoba's queso to Chipotle's queso, it's not even close. Chipotle's ingredients are very simple. You can pronounce all the ingredients. As a consumer, I like that. And if Chipotle can pull it off, that's impressive, and still have a great-tasting queso. It's on the spicier side of the equation. But I like the taste.
The reviews have been mixed up to this point. But from an investor's perspective, I think this is something that a lot of people will at least want to try out, and it won't be for everyone, just like no ingredient at Chipotle or any restaurant is. But I think it'll get people back into Chipotle, maybe switch that habit back to go to Chipotle. That's the hope.
Greer: For me, part of the challenge there is, they have to replace District Taco. I love District Taco. And District Taco has queso. It's a local place around here. So unless they have better queso than District Taco, I'm not going there.
Kretzmann: What do you look for in the perfect queso?
Greer: There's a consistency issue, and I'm a contrarian here, but I actually want to run out of chips before I run out of queso.
Kretzmann: That could be a problem with Chipotle's.
Greer: [groans] See, I hate that. I hate when they don't give you enough queso. And I know, this is a first-world problem. OK?
Kretzmann: Totally first-world problem, yeah.
Greer: It's beyond, it's like, what comes before a first-world problem? It's a Paris Hilton problem. It's a Paris Hilton problem. But you cannot run out of queso before you run out of chips.
Kretzmann: Well, what Chipotle has now, and I think this might be a relatively recent switch they've made, but you can buy a small bag of chips or a large bag of chips, and now they also have a small or a large size of queso. So I think, Mac, to scratch that itch, what you're looking for, get a small bag of chips and a large thing of queso, and you'll be good to go.
Greer: I'm probably not the best judge, because I would drink queso if I could.
Kretzmann: [laughs] Well, you need to try it out. We'll have to do a follow-up and see what you think.
Bush: Is the queso only for chips? Or can you get it in burritos and bowls?
Kretzmann: No, you can get it for anything. Just like guacamole is typically an add-on, you can get queso on there. Some of the reviews I've seen, they didn't really like the consistency of the queso, and ironically enough, it's because Chipotle doesn't have all the preservatives in there. There's lumps of cheese and other stuff in there. We're used to that artificial, silky-smooth queso. But I think that consistency issue goes away if you were putting it in a burrito or burrito bowl or a taco. So I think once people try it out, and hopefully they try it out in different ways, they'll probably find something that satisfies them.
But I really hope Chipotle does more to promote this, because otherwise, gosh, what a wasted opportunity when they really need people to get back into the stores.
Aaron Bush owns shares of Chipotle Mexican Grill, Facebook, and Twitter. David Kretzmann owns shares of Chipotle Mexican Grill, Facebook, and Twitter. Mac Greer owns shares of Chipotle Mexican Grill and Facebook. The Motley Fool owns shares of and recommends Chipotle Mexican Grill, Facebook, and Twitter. The Motley Fool has a disclosure policy.