Your Free Chipotle Guac May Be Made From Cheap Peruvian Avocados

(Bloomberg) -- Chipotle Mexican Grill Inc.'s offer of free guacamole with meals on National Avocado Day in the U.S. could be getting some help from Peru.

Simmering border tensions have boosted prices of avocados from top producer Mexico, which supplies as much as 80% of U.S. imports and is by far the world's biggest producer of the popular fruit. Additionally, adverse growing conditions at some groves in the region of Michoacan and a smaller crop in California has created a shortage, lifting Hass avocado prices to a record on July 18.

While they have since eased slightly, they remain higher than year-ago levels, and the surge has forced companies to seek sources of cheaper supply. Oxnard, California-based Mission Produce, the world's biggest avocado packer and a Chipotle supplier, is importing more of the fruit into the U.S. from Peru and Colombia.

“We are trying to diversify as much as possible to minimize the pain,” Stephen Barnard, president and chief executive officer of Mission Produce, said in an interview. “Everyone is short at this time.”

Barnard said prices could remain elevated until November. In the meantime, Chipotle is also looking at other countries including Chile. “For Peru specifically, we have increased the volume of avocados purchased this year versus previous years,” Laurie Schalow, a company spokeswoman, said in an email.

“The whole country seems to be in love with the avocado,” Chipotle Chief Executive Officer Brian Niccol said last week, noting the fruit has seen the most price volatility in Chipotle's basket of ingredients. “We're continuing to work in our supply chain to hopefully not have such big swings.”

Chipotle usually charges a fee averaging just over $2 to add guacamole to an entree. It waived the fee for the avocado-based topping on Wednesday.

--With assistance from Lydia Mulvany.

To contact the reporters on this story: Michael Hirtzer in Chicago at mhirtzer@bloomberg.net;Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Pratish Narayanan, Millie Munshi

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