Chipotle Mexican Grill (NYSE: CMG) isn't afraid to take chances these days, even as its largely steady menu continues to fuel a financially rewarding turnaround. The resurgent fast-casual chain is testing several new menu items, including carne asada as its latest new protein. Other potential additions include baked quesadillas, a new line of noncarbonated beverages, and baked nachos.
Chipotle stock has been on fire lately, more than doubling since bottoming out in late 2017. The key to the burrito roller's renaissance as both an investment and a dining option has been the doubling of digital sales over the past year, a trend that finds positive comps accelerating for five consecutive quarters. Embracing mobile ordering and the growing popularity of third-party delivery services has helped Chipotle breathe new life into its sales even as walk-in traffic continues to meander.
A new protein option at Chipotle is a pretty big deal, especially since the last addition didn't pan out so well. Chipotle removed chorizo from its assembly line in late 2017, clearing serving tray space for the rollout of the initially widely critiqued queso. It was a surprisingly short leash for chorizo, as the savory pork and chicken sausage had been added just a year earlier.
The 2013 introduction of sofritas -- seasoned tofu -- is the last protein option added that is still on the menu. Carne asada would join steak and barbacoa as a third beef option. It's unlikely that carne asada will mean the end of an existing protein option despite its similarity to steak, but there's only so much serving space on the Chipotle food line.
Chipotle has been testing carne asada in select markets in recent weeks, and with CEO Brian Niccol singling out the trial run at a recent investor conference it's a good bet that it will go national soon. Niccol has been slow with menu changes since arriving from Taco Bell 16 months ago, somewhat of a surprise given how Taco Bell is always stirring things up with innovative rollouts. However, his arrival at Chipotle proved to be a case of perfect timing with the early seeds of a turnaround already starting to bear fruit. Niccol has focused instead on cost controls, and that was evident in the chain's latest quarter with adjusted earnings growing more than four times as fast as its top line.
Carne asada, expanded beverage options, and new ovens that will improve the quality of its existing quesadilla product as well as give it a shot at putting out acceptable nachos can only help at this point. Chipotle is doing a lot of things right these days, but it doesn't mean that it can't excel with new offerings.
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