Taco Bell’s Smearing Chipotle Mexican Grill, Inc. (CMG) With Cool Ranch

Chipotle Mexican Grill, Inc. (NYSE:CMG) is cool, but is Cool Ranch even cooler?

Yum! Brands, Inc. (NYSE: YUM) is introducing new tacos today featuring shells with Doritos Cool Ranch seasoning.

The latest entry to Taco Bell’s Doritos Locos Tacos are officially hitting the market tomorrow, but Yum! Brands surprised followers on Facebook and Twitter by alerting them that the new menu item is available today.

Chipotle Mexican Grill, Inc. (NYSE:CMG)

A year ago Chipotle Mexican Grill, Inc. (NYSE:CMG) investors would’ve laughed off any attack from Taco Bell. Isn’t that where young penny-pinchers go to load up in the wee hours? How dare anyone compare Chipotle’s “food with integrity” with the slop being spooned out at Taco Bell?

However, the success last year of the original Doritos Locos Tacos and the slightly more upscale Cantina Bell line appears to be having some kind of effect on Chipotle Mexican Grill, Inc. (NYSE:CMG).

Comps at Taco Bell popped 7% during the third quarter, the first period that the Cantina Bell and Doritos Locos Tacos were available for the entire quarter. Chipotle Mexican Grill, Inc. (NYSE:CMG) clocked in with same-store sales growth of just 4.8%.

Most chains would love to see a typical store ringing up 4.8% more in sales than it did a year earlier, but Chipotle investors were used to more growth than that. Things only got worse when Chipotle’s comps only rose 3.8% during the fourth quarter.

Can Chipotle Mexican Grill, Inc. (NYSE:CMG) grow faster if Taco Bell has another hit on its hands?

In theory, it shouldn’t play out that way. Chipotle is fast casual. Taco Bell is fast food. Taco Bell competes with burger joints armed with similar value menus and drive-thru windows. Chipotle’s higher-caliber food makes it more likely to lose a customer to rival fast casual darling Panera Bread Co (NASDAQ:PNRA) before it comes up short against Taco Bell.

However, the novelty of the new Cool Ranch Doritos Locos Tacos may wind up costing both Chipotle and Panera in the near term.

There may also be a more pronounced move on Chipotle’s bottom line. Revenue grew at a reasonable 17% clip in Chipotle’s latest quarter, but income only climbed 7% for the period. Chipotle argues that it didn’t raise prices quickly enough as commodity costs inched higher, but could it also be that Chipotle was afraid to tweak its menu with higher price points given Taco Bell’s thriving at the low end?

We may never know. However, Chipotle better hope that it doesn’t post disappointing comps in the coming quarters. Given the stock’s lofty valuation multiples, it better prove that it’s the one that’s cooler than Cool Ranch.

The article Taco Bell’s Smearing Chipotle With Cool Ranch originally appeared on Fool.com and is written by Rick Aristotle Munarriz.

Longtime Fool contributor Rick Aristotle Munarriz has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and Panera Bread. The Motley Fool owns shares of Chipotle Mexican Grill and Panera Bread.

Copyright © 1995 Р2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!