Why Chipotle doesn't want you to order a steak burrito

Beef prices are continuing to squeeze Chipotle’s profit margins.

The price of beef is hurting the restaurant and packaged foods industries, according to a recent report by Morgan Stanley.

Steak and barbacoa burritos cost the company $US1 more to make than alternatives like chicken or vegetarian, executives told investors during an earnings conference call last year.

The chain is likely to discuss the higher price of beef when it reports earnings July 21.

Global droughts have led to a shortage of beef. Chipotle has started serving conventionally-raised steak in some markets to meet demand.

Consumers do eat some of that $US1 cost. A steak or barbacoa burrito costs about 69 cents more in New York City. In cheaper markets like Ohio and Texas, customers pay about 40 cents more.

Chipotle executives said it could raise prices of beef items this summer if the shortage continues.

The burrito chain says that last time they raised prices on steak and barbacoa, they didn’t see customers trade down to cheaper options.

The company prides itself on serving “food with integrity.” This means antibiotic-free, naturally raised meats and local produce.

Chipotle’s high standards have led to a shortage of carnitas.

Hundreds of restaurants have stopped serving pork after the company found that suppliers weren’t meeting its standards.

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