Chipotle’s CFO talks about customer loyalty, digital sales and guacamole prices

Chipotle CFO Jack Hartung joins Yahoo Finance Live to discuss the customer loyalty program, sales, menu expansion, digital sales, food supply chains and inflation.

Video transcript

JULIE HYMAN: Chipotle rewards are going global. The fast-casual restaurant chain is targeting overseas expansion for its successful customer loyalty program, starting in Canada. Chipotle is trying to prove to investors that the data collected from its loyalty program and menu enhancements, like cauliflower rice, are a hit with customers so far. This boosted sales. For more, let’s call Jack Hartung, CFO of Chipotle. Jack, good to see you. So tell me about the economics of the loyalty program, what it does for you, and what you hope it will do in Canada.

JACK HARTUNG: Yes, in the US we have had our loyalty program for just over three years now. We have 28 million members. And what attracts us the most is that we can have a more personalized relationship with these 28 million customers. And what we find when we look at our customers who join loyalty versus those who don’t join loyalty, those who join loyalty after they join, they come to Chipotle more often. And they spend more when they come.

So we just announced that we’ve rolled out loyalty in Canada. We are approaching 30 restaurants in Canada. We are starting to accelerate growth there. We already have several thousand people in our plan, in the loyalty plan, even though we only have a handful of restaurants, a few dozen restaurants there. But it’s a good start. And we expect to see similar results where Canadian customers become more loyal. We will have a more individual relationship. They can better understand the brand and how we source our ingredients. And I hope they come more often.

Brad Smith: Last quarter, digital sales accounted for 41.9% of food and beverage revenue for the company. Thinking further, as you further develop the type of digital opportunities for these customer connection points and look at what data you can get from them, how much would you like to see some of the digital sales actually represent the Chipotle affair?

JACK HARTUNG: Yeah, that’s a great question. I don’t have a goal per se, but let me tell you. During the pandemic, when things changed really quickly, our business went from, let’s call it 15%, 16%, 17% digital, to 70%. And that gave us a really good idea of ​​how quickly our system could pivot as our customers were looking for additional business. They wanted this contactless experience.

And then, more importantly, when we opened a Chipotlane, a Chipotlane is our version of what we call the digital drive-in of the future. So you order in advance. You pay in advance. You have just come up. We determine what time you will show up. You take your food and leave. When we open a Chipotlane, the digital goes up to 50%, 55%. So we’re certainly thinking 40%, when that’s more than double what our digital sales were pre-pandemic, we think there’s a lot of upside to going from that 40% to a much higher number .

JULIE HYMAN: Hey, Jack, when we talked to you, oh, over the last month you talked about the costs to you, input costs stabilizing, to some extent. Where are we now? I mean, I know the prices we all pay as consumers don’t necessarily stabilize. You have a little more bargaining power. But what’s ahead?

JACK HARTUNG: Yeah, listen, it’s always a challenge. We’ve seen over the last couple of months, what we’ve been talking about is that things aren’t taking another big step forward across the board. When we looked at, like, November, December, through, like, the March period, we saw most of our major ingredients, you know, like beef, dairy, and tortilla, that are impacted by wheat, have really taken a step forward just about every month.

We’ve seen that slow down a bit, although we’re now seeing avocado prices go up. If you go to the grocery store, for example, you’ll probably pay $4 for each avocado. It is very expensive. So there is always inflation. But it didn’t hit us every month as we saw at the end of last year and the first months of this year.

JULIE HYMAN: Yeah, now I feel lucky for the $2.50 I spent on avocados recently. Speaking of avocados, the last time we spoke, you also introduced me to the phrase “guacamole attachment rate,” which is, in fact, do people still get guac with the supplement? And so, again, if you could give us kind of another status report on that, if you see any downward trade effect from consumers.

JACK HARTUNG: Yes, listen, our customers love our guacamole. Attachment rate… yeah, sorry, that’s an industry term. But our customers receive guacamole in their bowl or on the side with fries more than 50% of the time. Thus, for more than half of the customers who walk in, guacamole is part of their order. We haven’t seen that drop at all. Our customers really love our guacamole. As you know, we mash and handcraft guacamole every day. And so it’s a delicious guacamole. And so our customers, they’re not giving up on that yet.

Brad Smith: Joining us today is Jack Hartung, Chief Financial Officer of Chipotle. Jack, thank you very much for the time. We would also like to continue the discussion in the future.

Joseph P. Harris