Chipotle gets some swagger back (it's been a long time coming)
Chipotle Mexican Grill is on somewhat unfamiliar ground: a rebound. At least, what seems to be the start of one.
On Thursday, the company reported 3.3 percent increase in second-quarter same-store sales, outpacing the 2.7 percent gain expected by analysts, according to Consensus Metrix. The fast-casual chain was so pleased with the numbers -- aided by increases in digital and delivery orders -- that it raised its forecast for the year: It now expects same-store sales to rise in a low-to-mid single-digit range, up from a prior target of low-digit growth.
Chipotle CMO Chris Brandt, who joined the company in April, told Ad Age that the brand is ready to turn up the marketing.
"I've never been more optimistic about the future of a brand," Brandt said late Thursday.
Its overall marketing mission, he said, "is to be more visible, more familiar and more relevant." Bottom line, Chipotle wants "to be more talked about."
That is, in more positive ways. The chain is still recovering from a pummeling to its reputation after food safety concerns (and hospitalized diners) made headlines in 2015 and beyond, affecting its sales and stock price. But since the spring, when Brandt arrived shortly after CEO Brian Niccol (they had worked together at Taco Bell), things seem to be improving.
Chipotle, Brandt said, will introduce new marketing in September on the heels of months-long consumer research. The campaign will "put a tagline on our brand that I don't think a lot of other brands could or would do," he claimed.
Marketing changes have already been implemented, including new TV spots--which ran in April, May and June--featuring the chain's fresh ingredients and a humorous tone. And Niccol, who bluntly said in April that the chain "has been invisible," said during a conference call Thursday that reactions to the marketing have been positive.
"We wanted to celebrate the food a little bit more, we wanted to have a little bit lighter tone and we wanted to use a little bit of a sense of humor," said Brandt.
The light comedic touch also shows up in some social media posts, like the one below hyping free guacamole for National Avocado Day on July 31 (an offer that also means Chipotle can collect customer data from those who redeem the online-only deal):
Brandt has kept the agencies that were in place when he joined: Venables Bell & Partners on creative, MullenLowe Mediahub on media and Day One Agency on social media.
Last month, Brandt said that Chipotle wants to become a purpose-driven lifestyle brand, which includes highlighting the sourcing of fresh ingredients as well as its food-prep techniques, areas that get a lot of attention these days from diners, especially younger ones. He's embracing its "food with integrity" and "cultivate a better world" ideas, and says he's not concerned that talk of integrity could make some consumers think of those infected with E.coli and salmonella after eating at the chain. It overhauled its food sourcing and processes after the outbreaks.
The brand celebrates its fresh ingredients, said Brandt, and "food with integrity is a mission."
The second-quarter results also showed that visits to its restaurants remained down in the second quarter versus a year earlier, but the rate of decline was not as steep as in the first quarter of 2018.
The chain, which has more than 2,400 locations, said 10.3 percent of sales in the quarter were from digital orders, up 33 percent from a year earlier. Delivery from third-party providers should be available from about 2,000 locations by the end of the year, executives said, up from about 1,700 currently.
Of course, its strategy for improvement is "not happening in a vacuum," said Wells Fargo analyst Jon Tower in a research note. Plenty of other fast-casual chains, casual dining and fast-food restaurants are busy with their own such moves to boost sales.
Chipotle expects marketing and promotional expenses at or slightly above 3 percent of revenue in 2018 (such costs were 3.2 percent of revenue in the second quarter). That's a lower percentage of sales than in the past two years when it hiked spending as it was desperate to get customers back. Chipotle spent 5.1 percent of revenue on marketing and promotions in 2016, and 3.5 percent of revenue in 2017.
