This month, Chipotle Mexican Grill (NYSE:CMG) will extend its Carne Asada limited-time offer to the rest of the year and into the first quarter of 2020. Introduced nationwide in September, Chiptole's Carne Asada option was originally scheduled to end in late November or early December. However, given the consumer demand for Carne Asada, Chiptole is extending the steak's time on the menu.
Let's take a look at whether the fast casual restaurant's latest trendy menu addition is enough to pump sales up in the longer term.
What's at steak?
Under CEO Brian Niccol's tenure, Chipotle has been introducing new menu items. Along with Carne Asada, the burrito maker has also been testing out Queso Blanco Salads and Quesadillas in key markets. For Chipotle, the introduction of new menu items should meet three criteria: delighting the customers, driving financial benefit, and seamless integration into the current restaurant operations.
At a recent earnings call, Niccol highlighted that the Carne Asada menu item checked off all three boxes.
"I'm pleased to announce the Carne Asada is the latest item behind Lifestyle Bowls and a rewards program to be successfully validated through this process and all three are meeting or exceeding our expectations," Niccol said. "Carne Asada is a limited time offering that is easy to execute operationally and as a unique flavor profile."
The addition of Carne Asada has had a noted impact on Chipotle. In the third quarter, Chipotle had revenue growth of 14.6% and same store growth of 11%. The increase in same store sales was due to the double bonus of more frequent guest visits -- up by 7.5% -- and a higher average check -- up by 2%. As noted on the third quarter earnings call, much of the added visits and the higher checks were due to the customers looking for Carne Asada.
"The good news is Carne Asada has done terrific on the traffic driving, as well as the check driving and then our operators have done a great job executing and the feedback we're getting from consumers, both new users and existing consumers is they love the product. So by all accounts, we're delighted with what Carne Asada is doing for the business, and as you fast forward to other initiatives, our intention is we want to derive all those types of benefits when we're launching a product," Niccol added.
Too much of a good thing?
When Carne Asada was originally rolled out, Chipotle was planning to have it as a limited time offer ending in late November or early December. The decision to have Carne Asada as limited time offer was made based on the meat supply limits going forward. Chipotle has historically been cautious with its supply chain, highlighting its integrity principles (think: in its supply chain program. reviewing farm sourcing to insure that its supplier farms that are not reliant on pesticides or synthetic fertilizers for its crops; the quality of pasture-raised livestock that are not exposed to non-therapeutic antibiotics or added hormones; and sustainable long-term environmental impact of its farm and animal suppliers.
Chipotle has also been vigilant with its food supply given the aftermath of E.Coli and norovirus outbreaks at its stores in 2015. Given these factors, the burrito maker was initially hesitant to expand the offer, even though Niccol previously hinted that Carne Asada might be a seasonal item that would come in and out of the menu.
With the recent announcement that Carne Asada's limited time offer is now extended, the restaurant stock has likely handled any meat supply issues to meet the growing customer demand. Its stake in more steak potentially forecasts into growing visitor numbers and a higher check, resulting in growing same store sales It remains to be seen if customers will continue to crave Chipotle's Carne Asada. If customers do, then the restaurant will find its future earnings juicy.