Chipotle Competitive Advantage

Posted: February 03, 2017

According to the Australian Food and Grain Council, the food industry in Australia is a major contributor to its economy, generating income in excess of AU$ 100 billion annually and accounts for a total of 26% of the total production in Australia. It is projected that the fast food industry will grow by 7% by the end of the current business year. Chipotle Mexican grill is a fast food joint dealing with tacos, burritos, burrito bowls, and fajitas among others. Its direct competitors in the Australian market include the Nandos and the McDonalds, with McDonalds controlling a total of 30% in the chained fast food sector. Most of Chipotles competitors such as Macdonald’s and Nandos have been in the markets longer, are more financially stable and are located in some of the best sites. The SWOT analysis below shows the strengths, weaknesses, opportunities and threats of the Chipotle which we will then discuss in comparison to its competitors.

Strengths

  • Its ability to obtain natural chicken and pork meat, together with its ability to prepare its offers without any artificial color or flavors is a great advantage
  • Its green initiative policy evidenced by the recycling of glass and plastics in its various restaurants is an environmental conservation strategy that helps promote its image
  • Its selling philosophy, Food with integrity, is a major driving force in the market.

Weaknesses

  • Its expansion plans are hindered by the inadequate management control system
  • The restaurant is associated with MacDonald’s which gives the Australian market a negative perspective of it being American

Opportunities

  • Global natural food trend
  • Environmental friendly policy

Threats

  • Escalating food prices
  • Upcoming fast food joints which would lead to market saturation

Compared to its competitors, Chipotle has done extremely well in its operations with a 24.41% year on year revenue increase in the first quarter and an average annual sales growth rate of 2.52% in the last five years. Its net income growth rates stand at 8.47% which is above the industry’s rate of 2.68%. On the other hand, the combined competitors’ average revenue growth rate is at 4.14%, with Nandos having a sales growth rate of 16.48%.  In order increase market share and compete with the big leagues in the market, Chipotles greatest strength would be to identify its potential areas of growth and maximize on them, for example it could open up more of its food joints across the various cities in Australia.

Competition in this market is majorly focused on product taste, how fast customers are served, the location of the business and customer services. MacDonald’s for example is a long standing worldwide brand that commands a large following of customers across the world, and controls a larger share of the fast food market.  Compared to McDonalds, Chipotle has gained increased popularity amongst consumers which is its greatest weapon of success. As opposed to its competitor, McDonalds whose food menu is perceived as containing mainly junk foods, Chipotle’s food with integrity menu gives them an upper hand in the market. This menu which is focused on offering healthy foods from humanely raised animals is viewed by the Australian market as a major boost to their preserved culture. This coupled up with its green initiatives and the philanthropic support to the community has enabled Chipotle to gain access into the hearts of the Australian consumers. Though its competitor, Nandos is known to raise and offer naturally produced foods, it has been recently reported that Nandos uses genetically modified products in its menus. This limitation of Nandos together with other competitors’ owns problems have also been a major boost to Chipotle which:

  • Obtains its animal products from local farmers. The animals for meat, chicken, pork are naturally cared for.
  • Uses organically grown beans in its menus
  • Uses no color or flavors in its foods

Another recognizable strength is its green initiative policy which is not advocated by any other of its competitors. The Australian citizens being an environmental loving population are greatly attracted to Chipotles green initiative projects that have greatly helped promote the restaurant. Despite the above strengths, it has been registered that the overall consumer spending during the first quarter of 2014, as well as the number of orders on iPhones and android had fallen. In order to stand the competition in the market and contend with the big players in this market, Chipotle has to adjust to the unpredictable ways of consumer spending and fluctuations in the prices of the raw materials in the market. This is because in line with its aim to offer natural foods, it must continually source for suppliers to meet demands and beat the escalating food prices.

The sales figures of Chipotles have been on a constant rising path. Its sales rose by 4.8% this year. Owing to the escalating cost of raw materials, Chipotle has been forced on raising its food prices especially of  burritos by as much as twice the price of the Taco Bell burritos. Despite this increasing in price, Chipotle was still able to stabilize its sales, but had most of its burrito customers shifting to Chipotle chicken based dishes.

Though the competition in the Australian food industry is so stiff and would readily lead to the downfall of any establishment, Chipotle has been able to put up a fierce fight to beat competition. It is currently the dominant player in the overall food industry. The restaurants strategy of operating just a few menus excellently is what puts them on top of the competitive chart.

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