From the 10-K:
Any increase in the prices of the ingredients most critical to our menu, such as chicken, beef, cheese, avocados, beans, rice, tomatoes and pork, would adversely affect our operating results. Alternatively, in the event of cost increases with respect to one or more of our raw ingredients, we may choose to temporarily suspend serving menu items, such as guacamole or one or more of our salsas, rather than paying the increased cost for the ingredients. Any such changes to our available menu may negatively impact our restaurant traffic and comparable restaurant sales, and could also have an adverse impact on our brand.
The great guacamole scare, which purported that Chipotle might be forced to remove the green stuff from the menu, made headlines on Wednesday and was no doubt exacerbated by the drought in California.
Chipotle, however, quickly calmed the fears of guacamole lovers, stating that the warning was just a routine risk factor disclosure, much ado about nothing. Thank goodness the media doesn't react to every risk factor disclosure contained within 10-K filings in the same manner; it would make for some very depressed investors.
If you really want to know what's happening in the avocado world, look no further than to the growers and marketers themselves.
Limoneira (LMNR), best known for its citrus production, is also one of the country's largest avocado growers, with 1,200 California acres worth. The company reported a 22% increase in avocado revenue and 25% increase in pounds produced for 2013.
But indications are that 2014 may be a down year because of "plant physiology." The company said, "The California avocado crop typically experiences alternating years of high and low production."
The extent to which the drought will affect 2014 production is unclear at this point, and Limoneira does own vast water rights within the state.LMNR data by YCharts