Chipotle and Shake Shack Are Bracing for Pricier Beef in 2020
Chipotle and Shake Shack Are Bracing for Pricier Beef in 2020
(Bloomberg) -- Chipotle Mexican Grill Inc., Shake Shack Inc. and other restaurant chains are steeling themselves for more expensive beef next year amid rising demand for the key ingredient in their burritos and burgers.
Chipotle’s Chief Financial Officer Jack Hartung singled out beef as the protein the company is most worried about in 2020.
“That’s the one we’re watching,” Chipotle’s Hartung said in an interview, referring to beef inflation. “There’s still talk that next year might be a tight market.”
It’s linked to the African swine fever that has obliterated pig herds in Asia, prompting a surge in demand for all proteins. Shake Shack has seen beef inflation since the third quarter and expects it to continue next year, Chief Financial Officer Tara Comonte said Dec. 4.
The price of beef trimmings -- a key cost for hamburger chains -- is expected to rise almost 15% next year, as supply fails to match demand, according to a Dec. 17 analysis by Telsey Advisory Group. When combined with higher wages, that puts restaurants on course for some of the “stiffest margin pressure in over five years,” Telsey said, with higher costs “likely unable to be offset by sufficient menu price increases.”
Chipotle imports a lot of its beef from Australia, where China is now looking to buy more protein following the impact of the swine fever that’s roiled global meat markets. Beef is the key ingredient in the company’s carne asada, steak and barbacoa burritos.
Shake Shack, meanwhile, has raised menu prices in the past when faced with significant food inflation, and the New York-based burger seller may do so again, Comonte said.
Darden Restaurants Inc. said Thursday that it expects low-single digit inflation in beef and chicken through May. The owner of LongHorn Steakhouses and Olive Garden has already felt some impact: Profit margins in the company’s fiscal first quarter fell due to the higher prices, it said in September.
To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net
To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Jonathan Roeder, Sally Bakewell
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