Chipotle Sees Sustained Demand for Digital

Chipotle Mexican Grill Inc.  Q3’ 21  total revenue topped $2 billion, an increase of 21.9% vs. the year prior. Store comps were up 15.1 percent. 

Digital Demand

Digital sales grew 8.6% year over year to $840.4 million and represented 42.8% of sales. A little more than half of the digital sales were from order-ahead transactions.

“We continue to retain about 80% of digital sales but have now recovered nearly 80% of in-restaurant sales,” said Brian Niccol, Chairman and CEO, Chipotle in a Q3 earnings call with analysts.

During Q3, Chipotle opened 41 new restaurants during including two relocations, bringing the total restaurant count to 2,892. About 10 percent, or 284, of all locations have the brand’s digital drive thru; 36 of the 41 new restaurants included a Chipotlane.

Niccol says the drive-thrus “continue to perform very well and are helping enhance guest access and convenience, as well as increase new restaurant sales, margins and returns,” said Niccol.

The brand is planning additional location in Canada – its first Chipotlane is opening later this week – and in the long term, expansions into Europe. 

“A more near-term pillar of growth has been our ongoing digital transformation, which is helping Chipotle become a real food-focused digital lifestyle brand,” he said.

Currently, about 65% of guests use in-restaurant as their main access point, nearly 20% use digital as their primary channel, and the remaining 15% to 20% use both channels, Niccol said. “We're encouraged by this dynamic as it gives us several future opportunities, including the ability to convert more of our in-restaurant guests into higher frequency digital users.”

Its loyalty program continues to expand its ranks and has about 24.5 million members.  “This gives us a large captive audience to engage with and distribute content that promotes our values, as well as motivates our super fans. We continue to leverage our CRM sophistication by focusing a lot more on personalization and using predictive modeling to trigger journeys, primarily for new and lapsed customers. These personalized messages are more brand-related as opposed to offers or discounts, which is allowing us to optimize program foundation and economics.

During Q3 the brand debuted Extras, an exclusive feature that gamifies Chipotle rewards with personalized challenges to earn extra points and/or collect achievement badges in order to drive engagement. “As the program grows, so does our ability to provide sophisticated and relevant communications to our guests, which will ultimately deepen the relationship between members and the brand,” Niccol explained.

[Chipotle's Digital Sales Top $2B; Loyalty Program, App Experience Continues to Evolve]

Niccol also gave a shout-out to its marketing team that “is built on a culture of accountability that encourages new ideas, that's committed to experimentation, and is ruthless on measuring returns, and isn't afraid to pivot to different opportunities if they don't perform to our high standards. Every day this team is focused on driving sales today, while enhancing our brand for tomorrow.” 

Food, beverage and packaging costs in the third quarter were 30.3% of revenue, a decrease of 200 basis points compared to the third quarter of 2020. The decrease was due primarily to leverage from menu price increases, partially offset by higher costs, most notably beef and freight.