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Chipotle Starts Serving Carnitas Again: Will it Boost Comps?

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Chipotle Mexican Grill, Inc.CMG recently announced that it has resumed serving carnitas - a pork dish - in 90% of its restaurants. This burrito chain had stopped offering Carnitas in Jan 2015 at one-third of its restaurants in the U.S. as one of its pork suppliers failed to comply with the animal welfare standards set by the company.

Except for restaurants in the Cleveland and Atlanta areas and in North Carolina and South Carolina, all its other restaurants in the country are now offering carnitas. The company is able to serve carnitas again with the help of existing pork suppliers and by adding a new partner, Karro Food. United Kingdom-based Karro Food produces delicious pork from pigs that matches Chipotle's animal welfare standards. All the restaurants are expected to begin serving carnitas by the end of Nov 2015.

Suspension of pork purchase from a supplier in Jan 2015 led to a pork supply shortage. As a result, the company stopped serving carnitas at most of its outlets in the first half of the year, which resulted in soft comps. In fact, owing to this, Chipotle expects comps in 2015 to be in the low-to-mid single-digit range, much lower than 16.8% comps growth witnessed in 2014.

Now that carnitas are back, the company is likely to witness higher footfall. However, a recent class-action lawsuit that reportedly alleges Chipotle of using genetically modified organisms (GMO) in its food, despite advertising that the food served at its outlets is genetically GMO free, could remain a headwind for comps of this Zacks Rank #3 (Hold) company. (Read: Chipotle in Trouble, Sued for False Non-GMO Claims )

Chipotle is one of the most recognized fast casual Mexican restaurant chains in the U.S. that boasts a viable business strategy. Chipotle's 'Food with Integrity' program, introduced in 2001, seeks to provide better food quality by using fresh ingredients and sustainably-grown and naturally-raised products such as pork, chicken and beef.

Such actions have helped the company to gain a loyal consumer base of health conscious consumers as the demand for natural and healthier food in the U.S. is constantly rising. Chipotle has been witnessing a fairly stable traffic trend over the past few years driven by its strong market position, menu launches and increased media exposure.

With increasing health consciousness, Americans are gradually refraining from food with higher calories, fat and sugars. Therefore, restaurants are increasingly changing their menu to focus on "good for you" products.

While Panera Bread Company PNRA plans to remove 150 artificial ingredients from its kitchens by 2017, McDonald's Corp. MCD will discontinue the use of chicken raised with antibiotics at its U.S restaurants within the next two years. Noodles & Company NDLS has also laid out plans to eliminate unnatural and unhealthy ingredients from its products.

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PANERA BREAD CO (PNRA): Free Stock Analysis Report

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NOODLES & CO (NDLS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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