WEBVTT - Chipotle CEO Brian Niccol Talks Chicken Crisis

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news for.

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<v Speaker 2>Our television and radio audiences. I'm happy to welcome now

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<v Speaker 2>Brian Nickel, the CEO of Chipotle, who, of course has

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<v Speaker 2>just announced that the fuller outlook over at Chipotle would

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<v Speaker 2>be boosted for the year because there is more growth

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<v Speaker 2>there than at other fast casual arrivals in this space. Here, Brian,

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<v Speaker 2>what's going differently for you than perhaps a lot of

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<v Speaker 2>the industry. What is driving people into the stores?

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<v Speaker 3>Yeah? Well, great to be with you guys.

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<v Speaker 4>And look, you know, I think the purpose of Chipotle

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<v Speaker 4>has always been food with integrity, using classic culinary techniques

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<v Speaker 4>so that we give people delicious, nutritious food. And the

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<v Speaker 4>other thing that I think we've just done even better

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<v Speaker 4>of late is bring that.

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<v Speaker 3>Experience to people in a fast way.

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<v Speaker 4>So, you know, one of the things that also makes

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<v Speaker 4>our brand really special is the customization that you can

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<v Speaker 4>get with all these greating greens d and so we've

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<v Speaker 4>been working hard to ensure we're staffed, we're trained, we're

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<v Speaker 4>deployed so that our team members can get people exactly

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<v Speaker 4>the burritover bole experience that they want at a pretty

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<v Speaker 4>meaningful speed, so that people can get on with their day.

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<v Speaker 4>So I think that's what you're seeing is the power

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<v Speaker 4>of great food, great culinary, great people, and now also

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<v Speaker 4>some great operations around throughput.

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<v Speaker 1>Can you talk to us a little bit, Brian about

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<v Speaker 1>the general state of the consumer. I think this stands

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<v Speaker 1>out as a very strong success story, but also in

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<v Speaker 1>the midst of a lot of skepticism with respect to

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<v Speaker 1>how much the consumer can continue to spend and the

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<v Speaker 1>general health of the consumer. What do you see from

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<v Speaker 1>your consumer? Is it Chipolle specific or do you generally

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<v Speaker 1>see a very strong consumer out there.

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<v Speaker 4>Yeah, Look, when we do the research on a broad

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<v Speaker 4>scale basis, we definitely see that consumers are feeling a

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<v Speaker 4>little bit of pressure on.

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<v Speaker 3>The economic side of things.

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<v Speaker 4>Right, Gas prices are elevated, They've been dealing with inflation

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<v Speaker 4>for a while. Fortunately, the wage market has been strong

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<v Speaker 4>and on employment has been really low. So the good

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<v Speaker 4>news is jobs are there, wages are there, but they

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<v Speaker 4>are feeling pinched on, you know, kind of their budgets.

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<v Speaker 3>As it relates specifically to Chipotle.

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<v Speaker 4>Fortunately for us, the feedback we get is the value

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<v Speaker 4>proposition has never been stronger. So if they're being more

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<v Speaker 4>choiceful in how they're going to choose their ten or

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<v Speaker 4>fifteen dollars on a meal away from home.

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<v Speaker 3>What we continue to hear.

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<v Speaker 4>Is we're one of the great solutions for that type

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<v Speaker 4>of outlay of cash. And so, you know, that's why

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<v Speaker 4>we're so dedicated to having great ingredients, you know, great

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<v Speaker 4>culinary and then obviously giving people the customization that they

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<v Speaker 4>want so they get the food at the speed that

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<v Speaker 4>they want to. So I think that's that is the

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<v Speaker 4>thing that's separating us right now is our ability to

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<v Speaker 4>provide this great culinary, great ingredients at what are pretty

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<v Speaker 4>reasonable prices.

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<v Speaker 2>It's interesting because some of your products are so popular

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<v Speaker 2>that not just the earnings today are grabbing a lot

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<v Speaker 2>of attention. It's this idea of chicken and the second

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<v Speaker 2>shortages really being faced. You know, we had reported that

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<v Speaker 2>you told staff or recommended rather that they stop eating

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<v Speaker 2>the chicken. Given the popularity of some of your chicken

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<v Speaker 2>items on your menu. How has this been perceived by employees?

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<v Speaker 2>There has been some pushback on the idea of itself.

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<v Speaker 2>And do you have to change anything in terms of

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<v Speaker 2>the way you handle the product.

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<v Speaker 3>No. I think this is a story that's looking for

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<v Speaker 3>a headline.

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<v Speaker 4>You know what we What actually happened is the supply

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<v Speaker 4>got really tight. We asked all our employees, including myself,

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<v Speaker 4>to pitch in for a week to maybe try something

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<v Speaker 4>else on our menu.

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<v Speaker 3>The good news is we're through that pinch. There's no

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<v Speaker 3>challenges on our chicken supply.

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<v Speaker 4>Actually, our supply teams that are finab you know, a

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<v Speaker 4>fabulous job of securing supply to what has been really

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<v Speaker 4>tremendous demands. So look, the good news is our employees

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<v Speaker 4>were happy to pitch in. I guess there were may

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<v Speaker 4>be some employees that didn't want to pitch in on

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<v Speaker 4>this one, but in the end, we came together, did

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<v Speaker 4>what we needed to do, and you know, we're going

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<v Speaker 4>to continue to focus on getting people great experiences with

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<v Speaker 4>our product and that includes chicken.

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<v Speaker 2>You know, it's interesting because you guys have been very

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<v Speaker 2>fast to pivot around a lot of things here. I'm

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<v Speaker 2>really curious around other potential ways you react to the consumer.

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<v Speaker 2>You had mentioned the general states so far, but do

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<v Speaker 2>you think that the consumer would be vulnerable to any

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<v Speaker 2>future price hikes? Do you think that the price hikes

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<v Speaker 2>already have been put on products? Or as far as

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<v Speaker 2>you can go.

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<v Speaker 3>You know, look, I don't know the answer to that

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<v Speaker 3>for everybody.

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<v Speaker 4>The good news for Chipotle is we definitely believe we

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<v Speaker 4>still have some additional pricing power if we needed to

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<v Speaker 4>take pricing in the future. Our hope always is that

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<v Speaker 4>we can hold our pricing because we want to protect

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<v Speaker 4>our value proposition always, and I think, frankly, it's one

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<v Speaker 4>of our competitive advantages are really positions of strength. It's

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<v Speaker 4>just the strength of the brand and because of our

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<v Speaker 4>unique commitment to ingredients and the speed at which we

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<v Speaker 4>can get people these customized meals. So you know, look,

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<v Speaker 4>I definitely think the consumer is feeling pressure.

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<v Speaker 3>All right.

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<v Speaker 4>We've had inflation for the last couple of years. In

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<v Speaker 4>some cases, things are up twenty thirty percent from where

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<v Speaker 4>they were just not that long ago. And now here

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<v Speaker 4>we are, hopefully with inflation starting to moderate, but still

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<v Speaker 4>things are well elevated from where they were a couple

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<v Speaker 4>of years ago. And I think that's what positions us

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<v Speaker 4>so uniquely in this space is at the end of

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<v Speaker 4>the day, you can still get a really meaningful bowl

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<v Speaker 4>or buredo from Chipotle for you know, around ten bucks.

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<v Speaker 3>If you choose not to have chips and glock or

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<v Speaker 3>drink and stuff.

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<v Speaker 4>So you know, look, I would suggest everybody look hard

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<v Speaker 4>at their value proposition and sure people feel great about

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<v Speaker 4>what they're getting for what they pay, and if that

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<v Speaker 4>plays out, you'll be rewarded with business.

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<v Speaker 3>I think that's what we're seeing happen at Chipotle.

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<v Speaker 1>Let's talk a little bit more about those embedded costs

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<v Speaker 1>and just a general sort of embedded inflationary costs and

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<v Speaker 1>how you're managing through that inflation. I know that Chipolle

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<v Speaker 1>has several automation projects underway. Maybe talk to us about

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<v Speaker 1>where your automation priorities are and how much that might

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<v Speaker 1>offset the margin pressures from steady or inflation.

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<v Speaker 3>Yeah, so thanks for asking about this.

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<v Speaker 4>You know, obviously, we set out to figure out what

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<v Speaker 4>are ways we can be more productive in the restaurants,

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<v Speaker 4>and specifically, we started with asking our employees what are

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<v Speaker 4>the what are the pinch points, what are the things

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<v Speaker 4>that are most challenging to do. And one of those

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<v Speaker 4>things that came up was cutting coreing and scooping.

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<v Speaker 3>Avocados every morning to make our guacamole. And so we've.

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<v Speaker 4>Created a new robotic or cobotic device that will cut

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<v Speaker 4>core and scoop the avocado we still have to hand

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<v Speaker 4>mash it, and we still have to you know, add

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<v Speaker 4>the cilantro lime, helipaiers and onions and stuff. But you know,

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<v Speaker 4>it gets rid of some of the harder parts of

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<v Speaker 4>making guacamole every morning, and those are That's.

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<v Speaker 3>Just one example of many other things we're looking at.

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<v Speaker 4>We got feedback that frying the chips is a difficult task,

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<v Speaker 4>so we.

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<v Speaker 3>Experimented with a a robotic arm to fry the chips.

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<v Speaker 4>That one hasn't worked out, so we're going back to

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<v Speaker 4>the drawing boards. But the good news is the learning

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<v Speaker 4>from a robotic arm for frank chips informed what we

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<v Speaker 4>did on designing what we call autocato. And then other

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<v Speaker 4>places that we're looking to build innovation is on our

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<v Speaker 4>digital makeline. Is their way for us to help our

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<v Speaker 4>employees build bulls and burritos.

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<v Speaker 3>On that line, so that with the one or two.

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<v Speaker 4>People working on the line, they're capable of producing even

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<v Speaker 4>more brudos and bulls. To other things too, like AI

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<v Speaker 4>machine learning to help us in our rewards program, are

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<v Speaker 4>forecasting our supply chain. So I'm really optimistic about the

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<v Speaker 4>innovation that we've got coming down the pike. Obviously, we

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<v Speaker 4>have to take it through our stagecaight process, validated, and

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<v Speaker 4>sure that it really plays out the way we want.

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<v Speaker 4>But I think we're hunting in the right places that

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<v Speaker 4>will make the job better, protect the experience for our customer,

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<v Speaker 4>and provide no compromise on the culinary.

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<v Speaker 2>You know, it's interesting speaking of inflation. Curious about the

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<v Speaker 2>California twenty an our minimum wage for fast food workers.

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<v Speaker 2>Since this has happened here, Curious Brian about your view

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<v Speaker 2>on what else would be impacted with that rise in

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<v Speaker 2>minimum wage for workers here. How do you think about

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<v Speaker 2>how that fits into your broader cost picture and whether

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<v Speaker 2>you need to make changes elsewhere.

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<v Speaker 4>Yeah, I mean, look, obviously we moved wages accordingly, and

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<v Speaker 4>then you know, I'm sure you're familiar with this, but

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<v Speaker 4>that creates compression for wages throughout the business, meeting managers

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<v Speaker 4>and apprentices and people that have more tenure at the

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<v Speaker 4>crew level. So we adjusted all those wages accordingly, and

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<v Speaker 4>we did take a price increase in California to offset

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<v Speaker 4>the wage inflation that we're dealing with, which is close

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<v Speaker 4>to twenty percent wage inflation.

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<v Speaker 3>And what I'm happy to say is, you know, we

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<v Speaker 3>didn't have to change anything else. You know, we're not

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<v Speaker 3>cutting corners on our food.

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<v Speaker 4>We're not cutting corners on portions, we're not cutting corners

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<v Speaker 4>on the.

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<v Speaker 3>Speed which provide our service.

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<v Speaker 4>You know, we're committed to giving people the Chipotle experience

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<v Speaker 4>they know and love, with the culinary that they know

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<v Speaker 4>and love. And you know, obviously we had to raise

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<v Speaker 4>prices a little bit, but you know the reality is

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<v Speaker 4>it's more expensive to do business in California, and you

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<v Speaker 4>know we adjust accordingly.

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<v Speaker 2>Brian, we thank you so much for your time. We

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<v Speaker 2>should say Chippote Shares actually today hitting a record off

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<v Speaker 2>the heels of those results as well. That is Brian Nicol,

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<v Speaker 2>the CEO of Chipotle. Mexican Girl