Chipotle says it will hike the cost of burritos if Trump slaps tariffs on Mexico – By Jeanette Settembre (Marketwatch) / June 3 2019
Burrito lovers beware.
Chipotle (CMG) could raise prices for its burritos if President Donald Trump follows through with his threat to impose tariffs on products from Mexico next week.
Trump said last week he would implement a 5% tariff on all goods and imports from Mexico beginning June 10 unless “the illegal migration crisis is alleviated.” The proposed tariffs, which could raise the prices consumers pay for imports including tequila, beer and avocados, could increase to 25% in the coming months.
“If the tariffs become permanent, we would look to offset these costs through other margin improvement efforts already underway,” Chipotle chief financial officer Jack Hartung said Monday. “We could also consider passing on these costs through a modest price increase, such as about a nickel on a burrito, which would cover the increased cost without impacting our strong value proposition.”
That 5-cent increase would mean prices for Chipotle’s chicken, veggie or sofritas-filled burritos would go up to $9 (from $8.95); steak, barbacoa or carnitas filled burritos would cost $10 (up from $9.95).
The California-based fast-casual Mexican food chain said its company costs would soar $15 million this year if the tariffs go into effect, Hartung said in a statement.
More than three-quarters of avocados in the U.S. were imported from Mexico last year, according to the Hass Avocado Board.
Prices for the trendy green fruit used for avocado toast and guacamole on brunch menus across the country rose in April when Trump threatened to close the Mexican border. Avocado prices soared to more than double the average cost after Trump’s announcement, chefs told MarketWatch, the biggest bump in a decade. Some restaurateurs were forking over $90 a case versus around $38 before the threat.
As of this week, one New York chef told MarketWatch he was still paying $82 a case.
© CHIPOTLE Burrito lovers beware — Chipotle could raise prices if tariffs hit products from Mexico. (Patrick T. Fallon/Getty Images).
Chipotle blamed the rising cost of fresh avocados for the possible menu price hikes. The restaurant chain says it refuses to use cheaper options like pre-mashed, or processed avocados.
Consumers can expect to see prices on other Mexican imports rise more than 20% in the coming months, Phil Lempert, founder of Supermarketguru.com, a trade publication that tracks food news and trends, told MarketWatch.
“Many of their [Mexican] exports enjoy high margins –– beer, tequila and produce, in particular –– so they don’t have to rely on the U.S. as their only export partner. The U.S. consumer is the big loser,” Lempert added.
Shares of Chipotle have been up 48.7% this year compared to 6% increase for the Dow Jones Industrial Average (DJIA) and a 9% gain for the S&P 500 (SPX).
