The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Pranav Kiran

TORONTO, Feb 27 (Reuters Breakingviews) - Cost-fatigued millennials and Gen Z customers are ghosting a former staple: the slop bowl lunch. It’s testing both the pricing power and premium valuation that restaurant chain Chipotle Mexican Grill CMG.N enjoyed over fast-food rivals like McDonald's MCD.N. But younger consumers are still indulging in fancy caffeine fixes, boosting the likes of $8 billion Dutch Bros BROS.N.

For the past decade, Chipotle cooked its competition with a fast growth and high margin combo. Younger customers were willing to pay extra for fresh ingredients, customization and a perception it was vaguely healthier than traditional fast food. Restaurant-level margins, an industry metric that measures gross margins plus depreciation as a percentage of revenue at company-owned stores, are in the mid-20s at the burrito maker compared with mid-teens at the Happy Meal seller according to Visible Alpha. Over that period, investors on average valued Chipotle’s enterprise at over 24 times next 12-month EBITDA, about 50% higher than McDonald's, according to LSEG data.

Since the pandemic, rising prices have hit younger workers. Burrito prices at Chipotle rose 6.4% a year on average between 2019 and 2025, according to Marketplace.org. That's faster than broader U.S. food inflation. Millennials have increasingly decided to forgo relatively expensive bowls and pack home-made lunches instead. Chipotle's same-store sales growth and therefore valuation multiples are converging with McDonald's.

However, cold beverages like iced coffee are now assuming the main character status. Younger shoppers are using drinks for more than just caffeine delivery. A $7 iced coffee is an indulgence within reach, compared to a bowl at twice the price.

The vibe shift shows up in the numbers. Between 2019 and 2024, sales in the quick service and coffee cafe category grew 7.5% on average, according to consulting firm Technomic. The growth rate was multiple times higher at Dutch Bros, Scooter's Coffee and 7 Brew, purveyors of energy-drink infused concoctions like “Dragon Slayer Rebel”. At Dutch Bros, iced or blended drinks made up nearly 90% of orders. It's a lever that newer chains like Jeff’s Bagel Run are pulling. Founded in 2019, beverages have risen to about 30% of sales from less than 10% three years ago, according to the company's president Justin Wetherill.

As long as younger consumers feel under financial pressure, it's down with slop bowls, and up with fancy cups.

CONTEXT NEWS

Dutch Bros’ on February 12 reported a higher-than expected 5.6% rise in full-year 2025 system same shop sales, beating average analysts’ expectation of 5.1% based on Visible Alpha data.

Chipotle on February 3 said it expected fiscal 2026 same-store sales to be about flat, compared with analysts' estimate of a 1.9% rise, according to data compiled by LSEG.