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Trendy Chipotle burritos show how pricing power belongs to the hip | Financial Express

The Denver-based Mexican food specialist “has done a great job cultivating a brand that commands pricing power.”(Reuters)

Corporate America can learn a lot from a chicken burrito. As many companies struggle to boost prices without alienating consumers, they may want to study Mexican-food chain Chipotle, which has managed to do both.

Companies including Chipotle Mexican Grill Inc, Apple Inc and PepsiCo have shown they’re able to take advantage of quality, trendiness, and, in the case of Pepsi’s snack foods, market dominance, to maintain high prices or even raise them faster than the inflation rate, now at about 2.1 percent in the U.S. Chipotle raised chicken-dish prices by 5 percent this year after leaving them untouched since 2011, and sales went up 29 percent last quarter.

The Denver-based Mexican food specialist “has done a great job cultivating a brand that commands pricing power,” especially among millennials, who are mainly people in their 20s, said Morningstar analyst R.J. Hottovy. “They’ve developed a very loyal following.”

As the U.S. economy remains sluggish – full-year growth may now struggle to reach 2 percent – other companies such as mass market automaker Hyundai Motor Co have felt the squeeze, with earnings under pressure from deep discounting in the U.S.

Hershey Co is raising candy bar and other product prices by an average of eight percent because of higher cocoa and dairy costs, even as it acknowledges the move will hurt its short-term sales. M&M maker Mars is following suit with a 7 percent increase.

Chipotle is prospering even as it raises prices on burritos that are already expensive – about twice as much as those sold by Taco Bell.

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Trendy Chipotle burritos show how pricing power belongs to the hip.

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