July 7, 2021: Chipotle’s Avocado Shortage

Would you like to add guac to that? If so, your Chipotle burritos and bowls could cost a little more thanks to an avocado shortage.

On this episode of the Happy Mouth podcast, chef Nyesha Arrington and restaurateur Philip Camino talk about the avocado shortage, what’s causing it, and how that’s having a massive impact on the fast-casual restaurant’s menu and stock prices.

Listen to Philip and Nyesha discuss the avocado shortage:

According to Chipotle CFO Jack Hartung, the company has “diversified” its avocado sourcing to counteract any seasonal shortages

Chipotle’s tip avocado suppliers come from Mexico, Peru, and California

Mexico is the top supplier but regularly ships fewer avocados during the hot summer months, typically offset by an increase in production in Peru

California steadily supplies about 12% of the overall avocado supply

Avocados make up between 5%-10% of Chipotle’s ingredient costs, which can have massive impacts on the company’s margins and stock prices

The Hass Avocado Board is projecting a 5.8% decline in third-quarter avocado sales compared to the same time last year, which will make it more costly for Chipotle to make its guacamole

Avocado prices have been up-and-down in 2021, seeing a 26% decrease in prices in the first quarter due to an influx of shipments from Mexico

By the second quarter, avocado prices jumped up 4% and have increased another 6% already in June

Chipotle has been facing the worker shortage head-on, looking to attract 20,000 new employees, increasing wages to $15-per-hour by the end of June and introducing referral bonuses of up to $750 per hire

The company has already raised menu prices by about 4% to offset increased wages but could need to raise prices again due to the avocado shortage

Rising avocado prices have already impacted Chipotle’s stock earnings, knocking it down 10-12 cents per share in the third quarter already

However, shares of Chipotle (CMG) are up 5% this year so far, creating a market value of $42 billion for the company

Links:

Happy Mouth Podcast Instagram

CNBC - Falling avocado shipments could hurt Chipotle’s margins, analyst says

CNBC - Chipotle hikes prices to cover the cost of raising wages

Market Watch - Chipotle could take a hit from higher avocado prices

CNBC - Chipotle to hike wages, debut referral bonuses in attempt to hire 20,000 workers

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