I think another challenging aspect of Chipotle’s international expansion is the supply chain, and whether the quality of ingredients demanded by Chipotle can be maintained efficiently. It’s already difficult in N America, my guess is that it would be a tad more difficult at a large scale in other geographies.
Yea that is another good point. Setting up supply chain generally, but the ingredients which Chipotle are rather strict about. A decent bit of Chipotle's menu is prepped in the early hours of each morning too, in store.
Yep--I’ve been to Chipotle a few times where they were out of a certain ingredient (usually a protein) due to sourcing issues. It’s a great part of the brand, but maybe a hindrance to exponential growth.
CMG should have considered expansion into China looooong time ago. if a tea drinking population can accept coffee, then the same rice-mixed with vegis and meat-eating population can certainly accept, wait for it, well a bowl of rice mixed with vegis and meat!
IMO this is a misread of the situation re: international expansion. After serious efforts to grow in that direction, they realize that the international stores aren't going to have the ROI, so pulled back on the growth plans there. European (and ROW) haven't ever really seen much demand for Mexican food, nor can they seem to get the tastes right. My guess is they're pulling out this talking point again, because they see slowing growth domestically and want to offer a long term story.
Thanks for the comment. I'd push back on your comment they ever "seriously" tried to expand internationally. I've read all of their earnings calls and I didn't see any indication this has ever been a serious endeavour. I do think it's possible they saw the ROI and said "nah, not worth it yet" and kicked the can down the line. But, I also feel like that's pretty natural. Most global brands based in the US exhibit slightly poorer economics internationally. I don't think its a reason to avoid it.
Moreover, Mexican food outside of the US has plenty of demand. While it is still lower than the likes of Greek, Indian, Spanish, Medi, Japanese, etc in Europe, its been growing for a while. It's a little bit of a chicken/egg thing too. While I don't think Chipotle is the best representation of true Mexican food... the concept of a burrito is not foreign to international consumers. There are joints serving burritos, bowls, etc all over the continent.
That said, I am not saying you are wrong, or I am right. I may well be misreading it. It could just be narrative to distract investors. That said, whether they choose to start ramping up international today, or in 5 years time, the money is going to be made in the US for the foreseeable anyway.
Very fair pushback. I remember how much management discussed the international expansion last time there was a growth recession, and I'm reading between the lines. European tastes may have changed as well.
Thanks for being courteous enough to share an alternate opinion, and also take pushback constructively too, its a rare thing in the comments section. You may well be correct, i've only followed Chipotle for a few years, and have only the benefit of reading history, I was not following it back then.
I'd like to believe European tastes, especially, have changed in the last decade or so. The likes of Tortilla Mexican Grill in the UK, as well as Chipotle, Wahaca, Barburrito, and some others, have shown there is appetite for a "chain" of Mexican quick serves here. Similar stuff going on in the EU too. As for Asia, I have less of a read on that.
I think another challenging aspect of Chipotle’s international expansion is the supply chain, and whether the quality of ingredients demanded by Chipotle can be maintained efficiently. It’s already difficult in N America, my guess is that it would be a tad more difficult at a large scale in other geographies.
Yea that is another good point. Setting up supply chain generally, but the ingredients which Chipotle are rather strict about. A decent bit of Chipotle's menu is prepped in the early hours of each morning too, in store.
Yep--I’ve been to Chipotle a few times where they were out of a certain ingredient (usually a protein) due to sourcing issues. It’s a great part of the brand, but maybe a hindrance to exponential growth.
CMG should have considered expansion into China looooong time ago. if a tea drinking population can accept coffee, then the same rice-mixed with vegis and meat-eating population can certainly accept, wait for it, well a bowl of rice mixed with vegis and meat!
Haha, I like the train of thought.
Loved your analysis of management's language over many years, Conor.
Hope you were making a reference to Laura Rittenhouse's Investing Between the Lines...
Thank you Harold!
IMO this is a misread of the situation re: international expansion. After serious efforts to grow in that direction, they realize that the international stores aren't going to have the ROI, so pulled back on the growth plans there. European (and ROW) haven't ever really seen much demand for Mexican food, nor can they seem to get the tastes right. My guess is they're pulling out this talking point again, because they see slowing growth domestically and want to offer a long term story.
Thanks for the comment. I'd push back on your comment they ever "seriously" tried to expand internationally. I've read all of their earnings calls and I didn't see any indication this has ever been a serious endeavour. I do think it's possible they saw the ROI and said "nah, not worth it yet" and kicked the can down the line. But, I also feel like that's pretty natural. Most global brands based in the US exhibit slightly poorer economics internationally. I don't think its a reason to avoid it.
Moreover, Mexican food outside of the US has plenty of demand. While it is still lower than the likes of Greek, Indian, Spanish, Medi, Japanese, etc in Europe, its been growing for a while. It's a little bit of a chicken/egg thing too. While I don't think Chipotle is the best representation of true Mexican food... the concept of a burrito is not foreign to international consumers. There are joints serving burritos, bowls, etc all over the continent.
That said, I am not saying you are wrong, or I am right. I may well be misreading it. It could just be narrative to distract investors. That said, whether they choose to start ramping up international today, or in 5 years time, the money is going to be made in the US for the foreseeable anyway.
Very fair pushback. I remember how much management discussed the international expansion last time there was a growth recession, and I'm reading between the lines. European tastes may have changed as well.
Thanks for being courteous enough to share an alternate opinion, and also take pushback constructively too, its a rare thing in the comments section. You may well be correct, i've only followed Chipotle for a few years, and have only the benefit of reading history, I was not following it back then.
I'd like to believe European tastes, especially, have changed in the last decade or so. The likes of Tortilla Mexican Grill in the UK, as well as Chipotle, Wahaca, Barburrito, and some others, have shown there is appetite for a "chain" of Mexican quick serves here. Similar stuff going on in the EU too. As for Asia, I have less of a read on that.
Long 'burrito' ;), thank you!
Pleasure Mav!