Chipotle: Our Advertising 'Kind of Needs Queso'

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Queso sera sera
Queso sera sera Credit: iStock

Chipotle Mexican Grill Inc., reeling from a recent norovirus outbreak, is ready to move on with a new menu item it sees as a savior: queso.

After an operational test in New York, Chipotle plans to offer queso -- its most requested item -- in more than 350 restaurants in Central and Southern California and Colorado beginning Aug. 1. If successful, queso could roll out to Chipotle restaurants nationwide as early as mid-September, Chief Marketing and Development Officer Mark Crumpacker said on a call Tuesday afternoon.

Chipotle also said its first national TV commercials had to be tweaked to hit the right tone. It plans to run new ads starting in mid-September more focused on "appetite appeal."

In its early days, Chipotle did not run TV spots because it didn't have enough restaurants to make it effective and it didn't have the types of offerings that really lend themselves to TV, Crumpacker said. Times have changed.

"I think that the advertising kind of needs queso," Crumpacker said.

That comment comes after the April launch of the "As Real As It Gets" campaign from Venables Bell & Partners. The company's first national TV spots, centered around comedians' confessions inside a Chipotle burrito, resonated with existing customers but was less effective at getting non-customers to buy its food "even though it scored above industry averages for television effectiveness," Crumpacker said.

(Digital ads were successful, driving 45% of all online orders and 60% of all catering orders during the ad flight, he said.)

Before the second flight of ads ran in May, Chipotle updated the creative "to feature more appetite appeal," Crumpacker said, contributing to a 10-point increase in intended visitation among fast-food and fast-casual diners who saw the spots highlighting the chain's ingredients.

"It still has the opportunity to be way more effective in terms of driving traffic into the restaurants," Crumpacker said of the campaign. Ads set to air starting in September will focus even more on that "appetite appeal." And Chipotle already has ads featuring queso ready to go for TV and elsewhere, he said.

"You shouldn't underestimate how much potential it has," Crumpacker said of queso, saying there's a lot of pent up consumer demand for something new.

Other plans include possibly switching from traditional to frozen margaritas. Plus, a crispy cinnamon dessert with a chocolate dipping sauce and a new salad are being tested in New York, and the first Chipotle drive through window opens at an Ohio restaurant this fall.

Chipotle had been largely moving past foodborne illness issues that hit its sales, stock price and overall reputation starting in 2015. But this month's norovirus outbreak at a Virginia store, followed by rodents dropping from a ceiling of a Texas restaurant, brought Chipotle back into the public eye in a way reminiscent of those late 2015 headlines.

"Our leadership there didn't strictly adhere to our company protocols and we believe someone was working while sick," Chairman, CEO and Founder Steve Ells said of the Virginia location.

Chipotle reported an 8.1% rise in second-quarter comparable sales, missing the 9.5% increase analysts expected according to Consensus Metrix. Sales trends are running down about 5.5% in recent days. But Chipotle still expects 2017 comparable sales to rise in a high single-digit range. Such a gain would likely be buoyed by queso, along with potential price increases.

Second-quarter marketing and promotional costs were 3.7% of sales, down from a year earlier when Chipotle was running more promotional offers to entice diners to come back. For the second half of 2017, it expects marketing and promotional costs to ease to about 3.1% of sales.

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