Chipotle Mexican Grill “Food with Integrity”
I. Key Problem
Chipotle Mexican Grill (CMG) “Food with Integrity” founded in 1993 with the aim of reinventing Mexican food with a policy of Food with integrity and the commitment to finding the very best ingredients raised with respect for the animals, the environment, and the farmers. The company witnessed a tremendous growth over the years until October 18, 2012 when its stock price suffered a significant decline from a 52-week high of $442.40 to $285.93. CMG who is a differentiator in the restaurant industry now faces an increase in food cost and shortened supply of organic items and also an intense competition from the launch of a Cantina Bell menu by Taco bell which Jeff Einhorn, a Hedge Fund Manager presented to have put CMG at risk of losing its potential customers. To stay steadfast in its policy means to increase the prices of its menus which lead to the question: “Could CMG continue to use quality and sustainably-sourced inputs as differentiators to justify a higher priced menu?” II. Relevant Theory
This case involves low cost versus differentiation theory. Chipotle is known for being a differentiator in the restaurant industry by using fresh ingredients, organic items, naturally raised meat free of antibiotics and fed with a vegetarian diet and its milk sourced from dairies that provided pasture access for their cows. Its policy which is “Food with Integrity” comes with a high price which was not inevitably passed onto customers but adjusted by its operational efficiency and thereby maintaining a high profit margin and giving it an edge in the industry. CMG needs to decide at this point how to sustain competitive advantage in the industry. Whether to allow the increase in food cost supplies, ingredients and organics to be passed on to the consumers by increasing the price in 2013? Or whether to use incremental revolution to avoid an extraordinary price hike. III....
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