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Can Chipotle Drink Its Way to a Turnaround?

By Rick Munarriz - Apr 4, 2016 at 9:06AM

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The fallen fast-casual darling is shaking things up with new soft drinks, beverages, and alcohol at a test location in Denver.

Everyone may be wondering if new food safety measures or even the potential push into gourmet burgers as a fourth concept holds the key to a revival for Chipotle Mexican Grill (CMG 4.59%), but the real spike could be brewing in a massive upgrade to its beverage offerings. Chipotle is testing several new drink options at one of its locations on its home turf of Colorado, according to Nation's Restaurant News.   

It's working with Coca-Cola (KO 0.59%) to switch out the more conventional offerings that came under fire because the fountain drinks still contain GMOs, something that seems to go against its "food with integrity" mantra in the eyes of some. It is going with Coke Life, a lo-cal version of Coca-Cola's signature soft drink that is sweetened with stevia and cane sugar. It's also going with Blue Sky sodas, a line of all-natural carbonated beverages that is distributed by Coca-Cola. It's the first time that Coke Life or Blue Sky are being dispensed as fountain beverages anywhere.

It's not just about mixing things up in terms of pop. Diners at the Denver-based Chipotle testing out the upgraded offerings can also wash down their burritos and bowls with a watermelon agua fresca beverage, a hibiscus tea enhanced by rooibos and lemongrass, or a new In Pursuit of Tea-branded iced tea formulation.

The new drinks are the result of Chipotle partnering with master sommelier Richard Betts, a move that is also naturally leading to some notable tweaks to its more potent libations. Chipotle's offered beer for ages, and three years ago it added premium margaritas to roughly half of its locations. However, with alcohol sales accounting for just 2% of Chipotle's sales, there's naturally room for improvement. 

Betts developed a new margarita with Sombra mezcal, Astral tequila, agave syrup, and fresh lemon and lime juices. There's also an organic sangria. A Westword interview with Betts also details the shift in beers, entailing the addition of Oskar Blues Beerito as a lager on draft and Mexico's Modelo Especial in cans.

These moves obviously won't change Chipotle's fortunes overnight. It just wrapped up its fifth month in a row of double-digit percentage declines in comps. Alcohol sales may never be a big driver given Chipotle's popularity as a weekday lunch stop for folks at work. However, offering more than the cookie-cutter beverages that can be had anywhere else can only help. It also can't hurt if the new drink options are more in sync with Chipotle's "food with integrity" battle cry.

Chipotle has a long way to go before turning things around, and we have no idea if or when the former market darling will go national with these new beverages. It makes sense. It should happen, and it may as well happen sooner rather than later as consumers are reshaping their expectations of the Chipotle experience. Investors should raise a glass because Chipotle's working on a new way to drum up its moribund comps. 

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Stocks Mentioned

Chipotle Mexican Grill, Inc. Stock Quote
Chipotle Mexican Grill, Inc.
CMG
$1,402.42 (4.59%) $61.51
The Coca-Cola Company Stock Quote
The Coca-Cola Company
KO
$64.68 (0.59%) $0.38

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