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Richard Church [email protected] (203) 307-2581

Chipotle Mexican Grill: Leavening Panera Bread’s Sales? April 29th, 2016

DISCERN platform reveals:

• Over 80% overlap between Chipotle and Panera in all regions within a 5-mile trade area

• Other potential dining alternative beneficiaries from Chipotle challenges

Chipotle Mexican Grill’s recent issues with food contamination and the resultant heavy losses of customers are widely known and do not appear to have ended judging by its first quarter earnings release. In its April 26 release Chipotle reported another significant decline in its same-store sales of 29.7%. Conversely, Panera reported a 6.2% increase for the same fiscal period.

Key Takeaway

As Chart 1 illustrates there appears to be a meaningful correlation between the trend of Chipotle’s same-store sales and Panera’s as Chipotle’s food contamination issues surfaced.

This would largely be attributable to the high competition intensity between the chains as the illustrations below show.

Chart 1. Chipotle & Panera Bread Comp-Store Sales Spread

30%

20%

10% CMG

0% PNRA

-10% Spread

-20%

-30% 1Q15 2Q15 3Q15 4Q15 1Q16

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Illustration 1, which is from DISCERN’s database of retailer and restaurant locations, quantifies to what extent Chipotle and Panera overlap within their respective five mile trade area geographies. The data shows that Chipotle and Panera compete within the same five mile trade area in 86% of the total trade areas, a significant amount of restaurant overlap for 2 large competitors within the sector.

Illustration 1. Trade Area Overlap

The illustrations below provide regional views of Chipotle and Panera’s competition overlap and the percentage overlap within the regions. Similar to the national metrics the amount of overlap is high with each region above 80% on a five mile trade area.

Illustration 2. Geographic Concentration - Southeast

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Illustration 3. Geographic Concentration – Mid-Atlantic

Illustration 4. Geographic Concentration – Northeast

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Illustration 5. Geographic Concentration – Southwest

Illustration 6. Geographic Concentration – West

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Illustration 7. Geographic Concentration – Midwest

At an even more granular local level as presented in Illustration 9 using Overland Park, KS as an example the competition intensity between Chipotle and Panera is clear.

Illustration 8. Local Market Study

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DISCLOSURE This document has not been prepared, is not intended, and should not be interpreted as a research report regarding any securities of any company. The research included in this document is intended solely for the use of institutional investors and is provided without warranty of any kind, either expressed or implied. The information and opinions expressed in this research, including the information used to compile charts and tables, are based on current public

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