Last week, Chipotle Mexican Grill (CMG 1.07%) announced results for the first quarter of 2021. What consumed investor attention was strong same-store sales (comps) growth of 17.2% and digital revenue that skyrocketed 133.9% from the prior-year period.
It's clear that the company's pandemic boost is far from over, as these metrics suggest. Management expects the momentum to carry at least through this quarter as well. What's more, roughly 200 new locations will be opened in 2021.
But there is one very important number that shareholders are probably not paying attention to, and it's an initiative that the company launched just two years ago. On the quarterly earnings call, CEO Brian Niccol stated that Chipotle now has a remarkable 21 million rewards members.
Here's why this is such a tremendous achievement in today's hyper-competitive environment.
Image source: Chipotle.
The importance of a loyalty program
Retail companies, and in this case restaurants, need any edge they can get when trying to satisfy existing customers while gaining new ones. And increasingly, consumers crave an omnichannel experience that can cater to their various needs, whether this means ordering physically at a store, ahead of time for pick-up, or for delivery.
Having a robust loyalty program benefits Chipotle in three ways. First, it propels revenue growth. Not only do members come in more often than non-members, but they also spend more. The new quesadilla that was introduced in March was a digital-only offering, incentivizing people who hadn't already to download the app if they wanted to try the menu item.
Second, retaining existing customers is less expensive than attracting new ones. Chipotle doesn't need to convince its rewards members how good its food is -- they already know. These first two points support the company's unit economics. In other words, this customer group is extremely valuable to the business.
Third, Chipotle's rewards program gives it a useful channel to communicate directly with these consumers while collecting unique insights on buying behavior. "For example, customers received communication about the quesadilla launch featuring their favorite protein based on their ordering history," Brian Niccol mentioned on the Q1 earnings call.
The opportunities are endless when it comes to creative initiatives that keep customers engaged.
An impressive accomplishment
The success of the program during its short history is exceptional.
In the most recent quarter, digital sales comprised 50.1% of total revenue. And half of these online orders were for pick-up, which is the highest-margin transaction for the business. Even as dining rooms begin to reopen, it's very encouraging to see hungry customers choose this option.
To understand just how phenomenal the Chipotle rewards program has been in the 25 months it's been active, consider that Starbucks, widely regarded as the pioneer of consumer-friendly loyalty programs, just announced that it now has 22.9 million members. This is slightly more than Chipotle.
However, the ubiquitous Seattle-based coffee chain launched its program in December of 2009, nearly a decade before Chipotle. Who says burritos can't be a repeat purchase category just like coffee? This bodes well for Chipotle.
Chipotle will continue to make enhancements to its rewards program in order to drive higher engagement for its existing members and gain new customers along the way. This sort of technological prowess is table stakes if retail and restaurant concepts want to thrive in today's digital age where consumers have an increasing number of choices in front of them.
Investors can rest easy knowing that Chipotle is at the forefront of this trend, delivering a positive and consistent consumer experience. This should support its ambitious expansion plans in the years ahead.
