Chipotle's Profits Are Dictated By Two Key Ingredients

The Chipotle menu has two elements particularly subject to inflation.

Let's be real: Chipotle's food isn't cheap, at least not for fast food. A single steak burrito, including tax, costs just over $12 at the location nearest me right now. And that's without the precious guacamole, which is an additional $2.65. But it's not just avocado prices that influence Chipotle's earnings. There are two big factors determining the margins for the business right now: queso and beef.

Chipotle posted higher than expected earnings during the third quarter of 2023. Its revenue rose by 11.3% over last year to the tune of $2.46 billion, and its net income for the third quarter rose nearly 13% to hit $313.2 million. That's a lot of burritos sold, but it also reflects the price increases that were enacted to "offset inflation." These price hikes, in turn, have been somewhat offset by the rising cost of meat and cheese—two ingredients Chipotle prides itself on the most.

The cost of Chipotle’s beef and queso

"Last month, we brought back our fan favorite and highly requested Carne Asada as a limited time offer and the reception has surpassed our expectations," said Chipotle CEO Brian Niccol in a recent earnings call. However, rising cost might suggest why carne asada doesn't join the permanent menu.


Jack Hartung, chief financial officer, explained on the call that "The benefit from last year's menu price increases was mostly offset by inflation across several food costs, most notably beef and queso."

These Chipotle ingredients have a pretty steep differential for customers, too. In Chicago, a burrito bowl with Carne Asada costs as much as $3 more than one made with chicken, carnitas, sofritas, or just veggies, and both the queso and guacamole cost nearly twice as much as any other salsa on the menu. A large order of queso and chips costs $8, whereas the cheapest (but still huge) burrito starts at $9.10.

"The benefit of the menu pricing increase we just took will be offset by the mix shift from Chicken al Pastor to Carne Asada as well as higher cheese and avocado prices," Hartung said, also citing wage inflation as the reason for higher labor costs.


Despite all this, Chipotle's still anticipating some sales growth in the upcoming fourth quarter, and shares have gone up by nearly 40% this year. I'm no finance guru, but that sounds like a pretty good return on investment.