If you’ve ever visited Chipotle, you know that guac is extra. But a dollop of the green stuff could prove detrimental to the burrito chain’s bottom line, at least if skyrocketing avocado prices are any indication.
The Street reports that the price of a single medium-sized avocado has surged 46 percent since last July, to $1.25. A supply shortage in June and July (typically the most popular months for avocado sales) has sent prices even higher.
According to the Haas Avocado Board, avocado prices have inflated exponentially just over the most recent months. In May, the average sales price of a conventional Haas avocado was $0.93.
Perhaps unsurprisingly, Chipotle buys a lot of avocados — the chain uses some 97,000 pounds of the stuff every day. According to its official guacamole recipe, the chain uses 48 avocados per batch (and makes multiple batches, in every store, per day). Avocados have always been fairly pricey — that’s why guac costs an additional $1.95 at most Chipotle stores. By comparison, Chipotle charged $1.80 for guacamole just two years ago.
But the chain has no plans to raise guac prices even higher in response to avocado costs. “We expect that food costs for the year will remain at right about the current level, as any efficiencies we achieve are likely to be offset by higher avocado pricing in the third quarter,” says Chipotle spokesperson Chris Arnold, who added that the chain does not “raise prices based on short-term fluctuations in our costs.”
The chain has already been grappling with rising food costs associated with new food safety procedures in the wake of last years E. coli disaster. So far, Chipotle has offset food cost increases with “small and targeted menu price increases” at some of its stores, according to a recent earnings report. Beef prices, which are currently down, have also helped the chain.
A study sponsored by the Haas Avocado Board and conducted last year found that millennials (Chipotle’s target market) are more likely to buy avocados than any other type of consumer. And they don’t seem to mind that “guac is extra.” In fact, it seems that avocado buyers in general have long been willing to pay more: The Haas study found that shoppers spend around 65 percent more in-store overall when avocados are in their shopping baskets.
• Avocado Inflation Could Spoil Chipotle's Quarter [The Street]