Today is National Avocado Day, but recent high prices for the guacamole must-have are giving some restaurant chains headaches instead of reason for a fiesta.
Executives from casual-dining chain BJ’s Restaurant & Brewhouse said during its earnings call last week that avocado prices were its “biggest surprise” in Q2. And Del Taco, during its recent earnings call, predicted food inflation would “peak meaningfully” above 3% for the third quarter, driven in large part by avocado prices.
At Chipotle, Q2 food costs were 33.7%, up 1.1% year over year, primarily due to high avocado prices.
“The biggest wildcard in terms of our margin potential is avocados,” CEO Brian Niccol told analysts during a call earlier this month. “If avocados normalize, avocados have increased by about 150 basis points just from Q1 to Q1. So, imagine if that comes back to us or if half of that comes back to us.”
Chipotle has been working to diversify its avocado pipeline so “they aren’t as greatly impacted by the swings in supply,” according to a spokesman for the chain.
On Wednesday, Chipotle offered free guacamole on orders placed through its app.
In early July, wholesale prices of midsized avocados from Mexico were 129% higher than last year and the highest they’d been in a decade, according to a USA Today report. Exploding demand for avocado coupled with low yields in California and Mexico have contributed to the price increases.
Prices have come down a bit since that high, but they remain about 80% over last year’s levels.
Chacho’s, a Tex-Mex concept in San Antonio, drew a bit of customer ire earlier this month for selling a “mockamole” made with broccoli, peas and other green vegetables after it couldn’t source avocados.
Some chains, though, are playing up their value offerings when it comes to avocados.
Qdoba Mexican Eats, in response to Chipotle’s single-day free guacamole offer, launched a petition to #FreeTheGuac, calling on its competitors to offer free guacamole every day. (“Because if there’s one thing we can all agree on, it’s that paying extra for guac is the pits,” the petition says.)
Qdoba recently tried charging for its guacamole, in a limited test. It apparently didn't go over well.
"During the recent period of record-high avocado prices, we conducted a small test at select locations where we charged for guacamole on entrees," Jill Adams, the chain's vice president of marketing, said in an email to RB. "This test has since ended and a scoop of our hand-smashed guacamole is now free on entrees at all our locations."
And 21-unit chain Dos Toros, which serves about 100 pounds of guacamole per day at each location, says it has no plans to change its pricing or portion sizes in response to high avocado prices.
“We are really happy with the quality of the avocados we’re getting from our current supplier, so we’re not looking elsewhere right now,” said Leo Kremer, the New York City-based chain’s co-founder, in an email to Restaurant Business. “Price will fluctuate with any supplier, and having a strong relationship matters a lot, especially when supply becomes super tight.”