Chipotle CFO talks customer loyalty, digital sales, and guacamole prices
Chipotle CFO Jack Hartung joins Yahoo Finance Live to discuss the company’s 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 chain setting its sights on expansion abroad for its successful customer loyalty program, starting with Canada. Chipotle is trying to prove to investors that data collected from its loyalty program and menu improvements, like cauliflower rice, are a hit with customers so far. It's been driving sales. For more, let's bring in Jack Hartung, Chipotle chief financial officer. Jack, it's great to see you. So talk to me about the economics of the loyalty program, what it does for you guys, and what you're hoping it will do in Canada.
JACK HARTUNG: Yeah, in the US, we've had our loyalty plan for a little over three years now. We have 28 million members. And the thing that's most attractive to us is we can have a more personalized one-to-one relationship with these 28 million customers. And what we find when we look at our customers who join loyalty versus 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 did just announce that we rolled out loyalty in Canada. We're approaching 30 restaurants in Canada. We're starting to ramp up growth there. We've already got several thousand folks in our plan, in the loyalty plan, even though we have just a handful of restaurants, a few dozen restaurants there. But it's off to a great start. And we fully expect we'll see similar kind of results where the Canadian customers are going to become more loyal. We'll have a more one-to-one relationship. They can get a better understanding of the brand and how we source our ingredients. And hopefully they'll come more often.
BRAD SMITH: In the most recent quarter, digital sales, they were 41.9% of the food and beverage revenue for the business. Thinking further out, as you expand more of the kind of digital opportunities for those connection points with customers and lean into that data that you're able to take away from it, how high would you like to see some of the digital sales actually represent the Chipotle business?
JACK HARTUNG: Yeah, it's a great question. I don't have a target per se, but let me tell you. During the pandemic, when things really changed quickly, our business went from, call it 15%, 16%, 17% digital, all the way up to 70%. And so that gave us a really good idea about how quickly our system could pivot, as our customers were seeking additional outlets. They wanted that touchless experience.
And then, more importantly, when we opened up a Chipotlane, a Chipotlane is our version of what we call the digital drive-through of the future. So you order ahead. You pay ahead. You just drive up. We figure what time you're going to show up. You pick up your food and you go. When we open up a Chipotlane, the digital is all the way up to 50%, 55%. So we certainly think 40%, while it's more than double what our digital sales were before the pandemic, we think there's a lot of upside to go from this 40% to a much higher number.
JULIE HYMAN: Hey, Jack, when we talked to you, oh, in the last month or so, you talked about costs for you guys, input costs stabilizing, to some extent. Where are we now? I mean, I know the prices that we're all paying as consumers aren't necessarily stabilizing. You guys have a little more negotiating power. But what's going on in that front?
JACK HARTUNG: Yeah, listen, it's still very much of a challenge. We did see over the last couple of months, what we talked about is, things weren't taking another big step up across the board. When we looked at, like, the November, December, until, like, the March ish time frame, we saw most of our major ingredients, you know, like beef and dairy and tortilla, which are impacted by wheat, really took a step up pretty much every month.
We did see that slow a bit, although we're now seeing some surge pricing in avocados. If you go to the grocery store, for example, you'll probably pay $4 for each and every avocado. That's very expensive. So there's still inflation out there. But it just wasn't hitting us kind of every month the way we saw during the close of last year and the first few months of this year.
JULIE HYMAN: Yeah, now I feel lucky for the $2.50 that I spent on avocados recently. Speaking of avocados, last time we talked, you also introduced me to the phrase, "guacamole attachment rate," which is, effectively, are people still getting guac with the upcharge? And so, again, if you could give us sort of another progress report on that, whether you're seeing any kind of trade-down effect on the part of consumers.
JACK HARTUNG: Yeah, listen, our customers love our guacamole. The attachment rate-- yeah, sorry, that's an industry term. But our customers get guacamole either in their bowl or on the side with chips more than 50% of the time. So more than half the customers that come in, guacamole is part of their order. We haven't seen that go down at all. Our customers really do love our guacamole. As you know, we handmash and handmake the guacamole every single day. And so it's delicious guacamole. And so our customers, they're not giving that up right now.
BRAD SMITH: Jack Hartung, Chipotle CFO, joining us today. Jack, thanks so much for the time. We'd love to continue the discussion in the future, too.
