Chipotle, Mondelez shares slide as weak demand, rising costs hurt sales view

By Joel Jose

Feb 4 (Reuters) – Shares of burrito chain Chipotle Mexican Grill fell 6% and Mondelez International slid 3% before the bell on Wednesday, as dour annual sales forecasts from the companies raised worries over weak consumer demand and rising input costs.

Lower‑income households have cut back discretionary spending as they contend with higher prices, delays in food stamp benefits and a cooling labor market.

Several large consumer goods companies such as P&G, Coca‑Cola and PepsiCo have lowered entry price points to help retain budget-sensitive shoppers.

SOARING BEEF COSTS WEIGH ON CHIPOTLE

Chipotle, whose burrito bowls start at around $10.45, plans to raise menu prices by 1% to 2% this year and expects flat same-store sales in 2026 as it tries to cushion the impact of surging beef costs, its largest commodity expense.

“The top-line guide was a disappointment and we think also speaks to the idea that underlying restaurant industry demand has not gotten better, at least not yet,” Piper Sandler analysts said.

Chipotle warned in October that consumer spending would remain pressured through early 2026, noting a pullback among U.S. households earning less than $100,000 a year, a group that accounts for about 40% of its sales.

Customers aged 25 to 35 have also cut back on restaurant visits as higher unemployment, looming student loan payments and slowing wage growth squeeze wallets, forcing restaurants to lean more on promotions and sharper marketing.

But even those efforts may fall short.

“As consumers’ quest for value is likely to persist in 2026, stepped-up investments in marketing, menu innovation, and operations, along with modest price increases, do not appear sufficient to propel positive comparable sales,” said Morningstar analyst Ari Felhandler, adding that restaurant margins may remain under pressure.

PRICE HIKES PUSH MONDELEZ SHOPPERS AWAY

Cadbury-owner Mondelez flagged a muted year ahead, noting that higher cocoa prices are now brushing up against cooling demand from shoppers already stretching their budgets.

Cocoa prices jumped 160% in 2024 before easing on a global surplus, but the company said it has already secured its 2026 cocoa needs at rates above current market levels, limiting its ability to cut product prices immediately.

Among the major Mondelez chocolate brands sold in the U.S., including Toblerone and Milka, the typical price for a full-size bar averages around $3.50 to $4.

“The magnitude of price rollbacks will depend on competitive dynamics, as the company seeks to protect market share and stabilize volumes,” Robert Moskow, analyst at TD Cowen said.

Mondelez said consumers, mainly in the U.S., are tightening spending and shifting toward value channels, pressuring volumes after multiple rounds of price hikes to offset sharply higher cocoa costs.

“While there will be some wraparound benefit from pricing taken in chocolate over the course of 2025, there could potentially be some need to reduce prices in European chocolate, depending upon competitive activity,” Bernstein analysts said.

(Reporting by Joel Jose and Anuja Bharat Mistry in Bengaluru; Editing by Arun Koyyur)