It takes more Chipotle rewards points to claim a free burrito now and the chain says it's because of inflation

• Chipotle just raised the price of a free entree in its app to 1,625 points.
• The increase was due to rising costs of ingredients, Chipotle told Insider.

Chipotle customers need more points than ever to get a free burrito, the chain confirmed to Insider.

A free entree reward, which can be redeemed for a burrito, bowl, salad, or taco order, now costs 1,625 points in the Chipotle app. Customers get 10 points for every $1 they spend, so they will now be eligible for a free entree after spending $162.50.

Until the most recent increase, an entree could be redeemed for 1,400 points. That means the new redemption cost will rise by about 16%.

Chipotle tied the points price increase to inflation when asked by Insider about the new redemption cost.

"To account for the additional cost of our real ingredients, we've marginally increased point values for menu items in the Chipotle Rewards Exchange," a Chipotle spokesperson told Insider in an email. Already, the chain had cited rising ingredient costs as a reason for increasing menu prices in August. Chipotle noted "higher costs for avocados, packaging, dairy, beef, and chicken," at the time.

Meanwhile, the latest increase in the cost of points to redeem free food was only the second since the launch of Chipotle Rewards in 2019, the chain told insider.

From a financial perspective, the change makes sense even if it might alienate some customers, analyst Mark Kalinowski of Kalinowski Equity Associates told Insider. Companies like Chipotle have to recalibrate from time to time, especially given high levels of inflation, to walk the fine line of not giving away too much for free while still making it worthwhile for customers, he said.

Rewards programs are increasing in importance because companies are finding that loyalty members tend to visit more frequently and have higher average spends, Kalinowski said. Chipotle has been successful in acquiring members so far, with more than 29 million as of July, the company said in an earnings call.

And the program doesn't just create repeat customers: The company uses the data gleaned from rewards members to figure out what they're ordering — what's popular and what might keep them coming back for more, it said.

"We are mining the data every day for insights, while leveraging the information to influence behavior and drive greater frequency. We are also working aggressively on greater personalization across the customer journey and obtained valuable insights on, which incentives provide the greatest ROI," CEO Brian Niccol said in the same call of the ways Chipotle is using reward member data.

Kalinowski said the key to having a successful loyalty program is getting as many members as possible. One way to entice them? "With free food and drinks," he said. "Companies like Chipotle are trying to figure out the minimum amount of free food they can give away while still convincing customers to become rewards members."

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