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Chipotle To Test New Strategy With New Menu Items

Burrito retail chain Chipotle (NYSE:CMG) announced this week that it will be adding five new items to its menu at a test kitchen in New York City.

The five items are nachos, chocolate milkshakes, quesadillas, avocado tostadas, and an updated salad. The items will be tested for an eventual rollout across the nation.

While it seems easy to add a few extra items to a menu, it may not be the case for Chipotle. The company will have to purchase new grills as well as re-choreograph the assembly line. It’s not that easy to add a quesadille to a menu it seems.

The company’s 2,500 locations do not have a set up that allows for making the new foods. The set up is pretty limited to the basic menu that Chipotle has of just burritos, bowls, tacos, and salads.

Chipotle’s (NYSE:CMG) chief executive, Brian Niccol, stated, “We’re not built right now to make a great quesadilla. The worst-case scenario is the person in front of you orders a quesadilla.”

Niccol explained, “That will slow you down. We want to fix that.”

With the current set up, the time to cook a quesadilla would slow down orders. An adult quesadilla is a lot more technical than a child’s small cheese quesadilla that the company currently does offer.

The new items will be tested in Manhattan and would then be expanded to a wider group of stores with changes made as needed along the way.

“They are going to be exceedingly cautious with products because of the lessons that they learned,” remarked John Gordon, who is a principal at the restaurant advisory firm Pacific Management Consulting Group.

CEO Mr. Niccol has also said that Chipotle intends on adding one or two promotional items during the year. “One of the things we’re learning is what’s the right way to bring in a product for a limited time,” he explained.

Taco Bell is known for its promotional items and Mr. Niccol was responsible for helping Taco Bell turn around before he came to Chipotle.

Remarking on limited-time offers, Wedbush Securities analyst Nick Setyan noted, “You’re going to lose sales and you’re going to lose traffic to competitors who are constantly marketing.”

“There are certain items that people are willing to switch up their order with, but it’s not going to become their permanent go-to order,” Setyan said. “Ultimately, they’re going to go back to ordering chicken or steak or the barbacoa.”

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