AP News

Chipotle to test 'shredded tofu' in Bay Area


NEW YORK (AP) — As costs for cheese and meat continue to climb, Chipotle is looking to attract vegetarians with a new tofu filling.

The Mexican food chain plans to test a shredded tofu filling called "Sofritas" in the San Francisco Bay Area next month, with the test expanding to other markets based on customer feedback. The Denver-based company said the tofu will be braised with roasted tomatoes, chipotle sauce and poblano peppers.

The move comes as Chipotle and other restaurant chains are being pressured by higher costs for ingredients. Earlier this week, Chipotle warned that its fourth-quarter profit would miss Wall Street expectations as a result of higher food costs. The company's growth is still strong relative to other fast food chains, with revenue up more than 17 percent from a year earlier. But food costs are expected to be just about a third of sales, up 130 basis points from last year.

Beef and dairy prices have been rising because of the drought, which sent the prices farmers pay for hay and other feed skyrocketing.

At a conference Thursday, Chipotle Chief Financial Officer John Hartung also said the chain was looking at raising prices this year as a result of the cost pressures.

"While we haven't made any decisions yet, the fact that our food costs are rising, it is more likely that we'll raise prices in 2013," he said, noting that it probably wouldn't be until the middle of 2013.

Jefferies analyst Andy Barish said that the company's plans for the year, such as the tofu and a new catering service, will only drive sales modestly even as Chipotle wrestles with continued cost inflation.

Although Chipotle's quality and service are impressive, Barish said it may have "limited its ability to add sales layers" because of its focus on a handful of of menu offerings.

He also noted the company is seeing increased competition. Although Barish didn't specify any chains, Taco Bell last year introduced a line of burritos and bowls intended to compete with Chipotle's offering at a lower price.

Chipotle, which opened in 1993, has about 1,350 restaurants. The company opened 183 locations last year, and expects to open another 165 to 180 this year.


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