CMG remains one of our core longs in the restaurant space.

With CMG getting set to release EPS after the close, one of the topics that will be top of mind is pricing and the consumer's reaction to the recent menu price increase.  We recently surveyed 500 consumers to gauge their response to Chipotle's recent menu price increase.

Summary: We believe CMG has the flexibility to raise prices, but as with any consumer company it is limited.  The results of our survey suggest that most consumers are resistant to the price increase, but the details under the hood suggest that CMG's core consumer is much more open to it.

THE HEDGEYE SURVEY

Question: Chipotle Mexican Grill is raising prices. Why will you pay more for its food?

Respondents were given four answers to choose from:

  1. I will not pay more
  2. Natural, high quality ingredients
  3. The speedy, customized service style
  4. Both

Not surprisingly, 51.4% of consumers said they would not pay more for Chipotle's food.

HEDGEYE CONSUMER SURVEY: DOES CMG HAVE PRICING FLEXIBILITY? - 1

What is interesting, however, is that 65.7% of consumers age 65+ made up the largest portion of those resistant to higher prices.  Importantly, Chipotle's key cohorts (Millenials and Gen Y) are much more forgiving about the price increase.  Additionally, the younger cohorts valued high quality ingredients more than the older cohorts.

HEDGEYE CONSUMER SURVEY: DOES CMG HAVE PRICING FLEXIBILITY? - 2

Lastly, it appears suburban consumers are far more resistant to price increases than urban consumers.

HEDGEYE CONSUMER SURVEY: DOES CMG HAVE PRICING FLEXIBILITY? - 3

If you would like more details about our Chipotle pricing survey, please give us a call.

Howard Penney

Managing Director

Fred Masotta

Analyst