Chipotle is considering cutting chorizo to make room for queso and other menu additions. The chicken-and-pork sausage was added to the menu in late 2016. Chipotle's drink line might also be getting an update. Chipotle might be getting rid of chorizo, according to BTIG analyst Peter Saleh.
The spicy chicken-and-pork sausage blend, which Chipotle rolled out nationwide last year, is customers' least favorite protein, accounting for just 3% of total entree sales, Saleh said following a meeting this week with Chipotle investor relations head Mark Alexee.
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Chipotle is considering cutting chorizo and other weak-selling menu items to make room for new additions such as queso dip, which the company started testing last month in hundreds of restaurants, Saleh said.
The chain has already cut chorizo from the menu in Colorado at restaurants where queso was added.
More new menu additions could be coming down the pipeline soon, such as spring mix salad with avocado citrus dressing and frozen margaritas — two items that Chipotle started testing last month.
Updates could also be coming to Chipotle's line of non-alcoholic beverages.
"The assortment, placement and in-store promotion largely hasn't changed in the past 8-10 years," Saleh said.
After decades of leaving its menu virtually unchanged, the company has been ramping up new product experimentation. The company just opened its first test kitchen that's open to the public in New York City.
Chipotle's new commitment to menu changes could draw new customers, but it could also be a sign of "desperation," according to Barclays analyst Jeffrey Bernstein.
"These offerings may be an indication of the challenges currently being experienced in returning sales volumes to prior peak levels with the traditional menu (i.e. Desperation?), and lead to issues previously feared, such as greater complexity, slower service, etc," Bernstein wrote in a note published last month. "Only time will tell, though the latter are very real concerns, as management was prudently strongly opposed to the addition of new menu items for the variety of operational concerns, which we believe are still valid."
Chipotle is still recovering from massive sales declines following an E. coli outbreak in late 2015.
The company has rolled out two new menu items since the outbreak: chorizo in 2016, and buñuelos — Chipotle's first ever dessert — in 2017.
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