Chipotle’s SWOT 2024 | SWOT Analysis of Chipotle

Company: Chipotle Mexican Grill, Inc.
CEO: Brian Niccol
Founders: Steve Ells
Year founded: 1993
Headquarter: Newport Beach, California, U.S.
Number of Employees (FY23): 110,000
Type: Public
Ticker Symbol: CMG
Market Cap (Jul 2023): $73.34 Billion
Annual Revenue (FY23): $9.90 Billion
Profit | Net income (FY23): $1.23 Billion

Fun Fact:

Chipotle discounts any entrée on their menu on Halloween if you dress in a costume.

Chipotle started in an abandoned ice cream store in 1993

Chipotle uses about 100,000 avocados a day

McDonald’s does not own Chipotle but was once an investor

Chipotle has its own music playlist

Table of Contents

Introduction

Chipotle Mexican Grill is a reputed American restaurant that Steve Ells founded in 1993 in Denver, Colorado. It operates within the fast-food sector, specializing in managing and operating fast-service eateries. The chain is known for its selection of burritos, burrito bowls, quesadillas, tacos, and salads, which are its primary offerings. Additionally, Chipotle is linked to the Pizzeria Locale brand, famous for its pizzas made with top-notch ingredients.

Chipotle is known for serving Tex-Mex (Mexican American) cuisine to more than one million customers daily. Chipotle operates 3,437 restaurants, mainly in the USA and a few international locations, i.e., Canada, France, Germany, and the United Kingdom.

The company’s reputation is strongly associated with providing fresh meal items, while its marketing and branding based on “food with integrity” focuses on sourcing its ingredients from ethically minded suppliers.

As a result, Chipotle Mexican Grill has facilitated a casual dining experience with its premium ethos. This can be further reflected in the assembly line service and approach towards preparing fresh food. With a strong foothold in the United States, Chipotle also has locations abroad in Canada, France, Germany, and the U.K., with its main office in Newport Beach, California, in the U.S.

In this SWOT analysis of Chipotle, we will evaluate the latest dynamics of Chipotle Mexican Grill to gain insights concerning its competitive advantages that allowed the company to attain dominance in the industry.

Chipotle’s Strengths (Internal Strategic Factors)

1. Provision of Tasty Food and a Customizable menu

Chipotle Mexican Grill is widely famous for providing a simple regular menu for its customers comprising salad, tacos, burrito bowls, and burritos. Additionally, it boasts customizable menus whereby customers can select from various ingredients and toppings, allowing them to craft a meal that perfectly suits their preferences.

This flexibility appeals to a wide range of dietary needs and restrictions and enables Chipotle to stay in tune with evolving food trends and preferences. For instance, in recent years, the brand has expanded its plant-based offerings, introducing dishes like sofritas (spicy tofu) and cauliflower rice to meet the demand for vegetarian and vegan options. Chipotle’s commitment to innovation and experimentation with new menu items has been instrumental in maintaining its relevance and attracting new customers.

2. Classic Method of Cooking

The restaurant adopts classic cooking methods in preparing their food that involve fresh ingredients, cutting knives, pots and pans, and stoves and grills. In contrast to fast-food chains, where most food is prepared in their processing plants, Chipotle employs an assembly line setup where food is prepared in front of the customers. This unique approach allows Chipotle to offer customers a differentiated ordering and dining experience. By enabling customers to participate in the assembly of their food, they feel empowered to customize the ingredients that go into their meals.

3. High-Quality Food

Chipotle uses fresh ingredients in its food preparation, often promoted as “Food with Integrity.” The brand procures its ingredients from local suppliers, and all meals are prepared on-site, guaranteeing customers a consistently fresh and flavorful dining experience. Moreover, Chipotle is dedicated to utilizing only genuine, whole ingredients devoid of artificial preservatives, flavors, and colors. This commitment ensures that customers can confidently enjoy their meals, knowing they are making a healthy choice.

4. Digital Friendly

Chipotle is very digital-friendly, and they have introduced an ordering app to help customers avoid long wait lines during peak lunch or dinner hours. You can order food on Chipotle’s app a few minutes before coming to the restaurant. It means you can cut the entire line and pay for your food in seconds. Chipotle’s effective adoption of e-commerce increased the company’s revenue in 2023 by 14.3% to $9.9 billion. Most of Chipotle’s restaurants stayed open for to-go orders at the height of the COVID-19 pandemic thanks to the robust digital platform it built in 2017.

5. Fresh Food

Chipotle doesn’t carry a microwave or freezer in its restaurant. They have walk-in refrigerators with fresh ingredients, herbs, spices, rice, etc. They hand-make fresh food such as guacamole, lime rice, salsa, and meat every day from scratch.

6. Extensive Network of Restaurant Chain

In 2023, Chipotle opened 271 new restaurants, bringing the total number of restaurants to 3,437 worldwide, with most being in the U.S. and spread across 49 states. It also operates outlets across Canada, the UK, France, and Germany.

7. Responsibly-Sourced Meat

With an immense focus on sustainability and animal welfare, Chipotle Mexican Grill insists on using animals grown with care, “Responsibly Raised,” without using non-therapeutic antibiotics, hormones, etc. The brand embraces eco-friendly packaging and supports local farmers, reducing its carbon footprint and championing sustainable agriculture. Furthermore, Chipotle’s commitment to sustainability goes beyond its sourcing and packaging practices. It also invests in renewable energy and has pledged to source 100% of its electricity from renewable sources by 2025.

8. Maintaining Close Relationships with Suppliers

The focus of Chipotle lies clearly upon the acquisition of high-quality fresh ingredients, which is necessary to ensure high levels of safety and quality at the restaurants. It is made possible through close relationships with their reliable suppliers.

Chipotle’s Weaknesses (Internal Strategic Factors)

1. Dependence on few ingredients and suppliers

Chipotle’s menu heavily depends on key ingredients, including avocados and beef. Any supply chain disruptions or price fluctuations can significantly affect the brand’s consistency in offering these items. Moreover, dedication to sourcing high-quality, sustainably produced ingredients can restrict its flexibility in quickly adapting to supplier changes or seeking alternatives during supply chain challenges. This can result in menu disruptions or increased costs for the brand and its customers. – Chipotle Mexican Grill depends upon a limited number of suppliers for its main ingredients: chicken, pork, and beef.

2. Dependence on the US Market

Chipotle depends heavily on the U.S. market for revenues, given that it accounts for more than 95% of its total restaurants. Likewise, California accounts for about 15% of the total restaurant chains. Dependence on the U.S. market could present significant problems, especially with the stagnation of the economy, given the lack of diversification.

Image Source: Statista | Sales of Fast Casual Food Chain in 2017

3. High Sodium Content

Chipotle is known to have high sodium content in its food, which can lead to high blood pressure. For example, the sodium levels in its main carbohydrate sources, such as rice, tortillas, or tacos, can vary from 160 to 600 mg, except the crispy corn tortilla, which contains 0 mg of sodium. The high sodium content could pose significant risks to the company’s reputation at a time when most people are highly cautious about what they consume.

4. Limited food items on the menu

Chipotle’s menu lacks a wide range of food items as it is limited to mainly burritos and tacos. This menu has remained unchanged over time, with only the occasional addition of new meats and a few limited-time offerings. This trend of embracing limited-time promotions is common among quick-service restaurants, a practice that Chipotle has only recently adopted. As a result, their customers spend relatively high at their competitors’ outlets, such as Panera Bread. The limited menu could present a significant problem for future growth.

5. Unfavorable Pricing

In times of economic uncertainties, consumers are more concerned about getting value for their money. The use of premium ingredients drives up the prices of menus at upscale eateries, making them less appealing to price-conscious customers. For instance, in 2024, a chicken burrito at Chipotle was priced at approximately $8.40, while Taco Bell provided a comparable option for just $2.49.

6. Poor Food Safety

Chipotle has been the subject of several food safety concerns, significantly tarnishing its reputation and diminishing customer trust. Despite efforts to enhance its food safety protocols, these incidents underscore the challenges of serving fresh, unprocessed food on a large scale. 2018, more than 1,000 people became sick after eating at Chipotle’s burrito restaurants.

Chipotle was sued for violating food safety and agreed to pay $25 million in April 2020 to resolve charges. It is the largest fine ever handed out by the U.S. Justice Department in a food safety case. Furthermore, the negative publicity surrounding these outbreaks has led to heightened scrutiny and regulation from government agencies, which can be costly and time-consuming for the company. This is a significant weakness since customers hesitate to eat in restaurants linked to food-borne illness outbreaks.

Chipotle’s Opportunities (External Strategic Factors)

1. Expansion into International Markets

The demand for Mexican cuisine is increasing rapidly. Studies predict that the market share for Mexican food will grow by $113.85 billion from 2021 to 2026. This growth is driven by urbanization, health trends, and cultural popularity. Given that Chipotle has a small number of restaurants outside the U.S., it is high time it considered expanding into more markets on the international scene to address the growing demand for Mexican food. It can collaborate with local suppliers and farmers in each market to source fresh and authentic ingredients, helping them stand out from competitors and cater to customers’ preferences for locally sourced food. Some countries the company can consider expanding into include the Philippines, Norway, Finland, and Denmark. By expanding into new regions and adapting to local preferences, the company can broaden its revenue sources and lessen its reliance on the U.S. market.

2. Food Delivery and Takeout

The online food delivery market is experiencing significant growth, with a compound annual growth rate (CAGR) of 9.04%. This market is expected to expand from $1.20 trillion in 2024 to $1.85 trillion by 2029. The surge is driven by increasing consumer demand for convenience and the widespread adoption of digital platforms. This trend reflects a shift in how people prefer to order and enjoy their meals.

With the expected growth, it is high time Chipotle improved its online ordering platform to cater to a customer base that wants their orders delivered to their doorstep. Furthermore, it could also consider forming partnerships with third-party delivery services such as Uber Eats or DoorDash to broaden its customer reach and enhance its delivery capabilities. To improve the takeout experience, Chipotle might introduce a mobile ordering system that enables customers to place orders and make payments in advance, thereby reducing wait times and minimizing interactions with staff.

3. Health-Focused Option Opportunity

The Health and Wellness food market is expanding at a compound annual growth rate (CAGR) of 7.54%. It’s projected to increase from $516 billion in 2023 to $859.43 billion by 2030. This growth is fueled by consumers’ rising awareness of healthy eating habits and their efforts to prevent lifestyle-related diseases. Consequently, there’s a growing demand for nutritious and health-focused food products.This trend is gaining momentum as individuals look for methods to sustain good health and prevent illness. Additionally, the prevalence of chronic diseases like diabetes, heart disease, and obesity has heightened awareness regarding the significance of making healthy lifestyle choices. Chipotle can tap into this fast-growing market opportunity by introducing new health-focused menu options and low-calorie alternatives.

4. Expand Menu options

The increasing popularity of vegan protein products is driving the growth of the plant-based protein market. Valued at $13.27 billion in 2022, it is projected to reach $25.53 billion by 2030. This surge is due to more consumers seeking sustainable and health-conscious dietary options. As a result, the demand for plant-based protein continues to rise significantly. The strong demand is one reason Chipotle should consider expanding its menu offerings to cater to the emerging market. While a customizable menu is a big strength, the brand can further engage customers by introducing new items or limited-time offers. This could include seasonal items, new protein options, or innovative ingredient combinations. Another opportunity lies in expanding breakfast options, as the fast-casual breakfast market is experiencing growth.

5. Loyalty Program Opportunity

Loyalty programs are now essential in the retail sector, with 90% of businesses implementing them to maintain their customer base. The global loyalty management market is also seeing significant growth, boasting a compound annual growth rate (CAGR) of 15.2%. It’s expected to reach a market value of $41 billion by 2032, underscoring the critical role of customer loyalty strategies in achieving business success. Chipotle can leverage the benefit of loyalty programs to fend off stiff competition for customers’ dollars. Consequently, it can encourage customers to visit its restaurants more often by introducing a loyalty program. This could include offering rewards like complimentary meals, special discounts, or early access to new menu items. The loyalty program could also provide valuable insights into customer behavior and preferences, enabling Chipotle to customize its marketing strategies and menu offerings more effectively.

Chipotle’s Threats (External Strategic Factors)

1. Loss of Customer Trust due to Food-Borne Illness

Chipotle has faced issues with food safety before, and another occurrence could significantly harm its image, resulting in a decrease in clientele, income, and possible legal consequences. It has faced a series of health-related incidents, ranging from norovirus to E.Coli to salmonella outbreaks, sickening hundreds of customers in several states.

2. Regulatory Challenges

The restaurant and catering sector is governed by various rules concerning food hygiene, employment, public health, and ecological norms. Alterations in these rules or failure to adhere to them can lead to fines, sanctions, or adverse media attention, impacting Chipotle’s image and economic results. Likewise, by expanding into new markets, the company would be subject to regulatory hurdles that could significantly affect its core business.

3. Challenges in attracting and retaining employees

Due to the growing demand for dining in restaurants and the further strengthening of the overall economy, the labor market is struggling and is identified as being tightened. As a result, Chipotle Mexican Grill was conducting a one-day hiring binge to bring in new workers. A series of emerging socioeconomic trends and labor-related regulations has made workforce planning within the restaurant industry more complex. This includes predictive scheduling laws, “just cause” termination legislation and a broader trend known as the “great resignation.” As a result, Chipotle is facing an increasingly competitive market for qualified talent.

4. Supply chain problems

Chipotle’s focus on using fresh, top-notch ingredients from suppliers who are both sustainable and responsible puts the company at risk of facing supply chain interruptions, including natural disasters, failed crops, or problems with moving goods. Such disruption can result in higher expenses and difficulties in running the business. Due to the implication of strict policies associated with feeding and raising animals, hundreds of Chipotles encountered problems in their pork supply.

5. Market Uncertainties and economic uncertainties

Unpredictable world events pose the biggest risk to Chipotle’s core fast food business, affecting customer behaviors and spending patterns. In 2020, the food business was adversely affected by the COVID-19 pandemic as the social distancing policies began, significantly affecting Chipotle. During periods of financial instability or downturns, customers might be more hesitant to eat at restaurants or invest in unnecessary items, such as quick-service dining, resulting in falling revenues for Chipotle and other dining establishments.

6. More vital Unions and Employee Collectives

Stronger workers’ unions and collectives are always a threat that hangs over any business that requires a workforce. In April 2020, leaders of Chipotle’s workforce convinced a federal appeals court to revive a collective action lawsuit filed by more than 500 employees. If the court rules in employees’ favor, Chipotle will have to spend millions to cater to their federal overtime requirements. Stronger unions threaten Chipotle’s profitability.

7. Intense Competition

The growing competition in the fast food business, especially from Qdoba, Moe’s Southwest Grill, and Blaze Pizza, poses one of the biggest threats. The intense competition could result in market share erosion and affect its profit margins. To maintain its competitive edge, Chipotle must persist in innovating and setting itself apart through distinctive menu items and marketing strategies to underscore its dedication to sustainability and ethical sourcing, harness the power of technology and data to tailor the customer experience and provide more convenient ordering and payment methods, including mobile ordering and delivery options.

8. Changing Consumer Tastes and Preferences

Consumer preferences and tastes evolve, potentially decreasing demand for Chipotle’s offerings. The company must consistently update its menu and marketing strategies to stay relevant and meet customers’ changing needs. Likewise, the wide variety of choices available in the restaurant sector, including national chains and neighborhood spots serving food comparable to Chipotle’s, gives diners many options to select from. This broad selection of possibilities might discourage customers from opting for Chipotle.

References & more information