How Is Chipotle Dealing With The Aftermath Of The E.coli Outbreak?

The Mexican chain restaurant, Chipotle Mexican Grill (NYSE: CMG), has been suffering ever since it was struck by an E.coli scandal last year. The E.coli or norovirus outbreak at Chipotle restaurants across the country, left hundreds of customers sick, thus, causing the closure of 43 Chipotle restaurants in the states of Washington and Oregon. The incident eroded over 45% of the company’s stock value, resulting in a ~$6 billion loss in market cap.

Since then, the CEO has initiated programs like “Food With Safety” and “Chiptopia” to attract customers back. In a bid to make Chipotle “the safest place to eat in the world,” company executives are working with food safety testing firm IEH Laboratories and Consulting Group to conduct reviews of ingredient handling and preparation, staff training, and routine audits.

In addition to improving its food standards, Chipotle has also had to invest heavily in marketing and promotional activities. In the first half of 2016, it invested 26% more in marketing and promotional activity, as compared to the year-ago period. The company believes it is critical to reestablish contact and frequency among its guests to refurbish not only its financial performance but its reputation.

In the first phase of its recovery plan, which ended in the first half of the year, Chipotle focused on winning back its customers. In its recent earning release, the company  said that its data shows that the majority of its most loyal customers have returned, but many of them are not coming as frequently as they used to. Therefore, the second phase of the recovery plan, which was kicked-off after the second quarter earnings results, is to increase visit frequency and attract new customers, while continuing to win back its customers. The marketing activities are an important part of its strategy to help drive sales recovery.

Going Forward

The Mexican restaurant said that its investment in marketing and promotional activities will remain at elevated levels as it continues to aggressively engage with its customers to regain their trust and loyalty.

Going forward, the marketing programs will emphasize  advertising and digital content to highlight Chipotle’s commitment to using high-quality ingredients and preparing food using classic cooking techniques. Other activities the company will be focusing on for the remainder of the year are targeted promotions inviting groups like students and families; the national roll-out of chorizo by the end of the year; the annual Burrito Halloween promotion; a holiday promotion and a gift card incentive program; continued improvements to its mobile and e-commerce programs; and emphasis on restaurant level marketing to delight customers on a very local and individual basis.

Have more questions about Chipotle Mexican Grill (NYSE: CMG)? See the links below:

• Down, But Not Out: Chipotle Returns To Profitability In Q2’16, Despite Weakness In Top Line
• Chipotle Mexican Grill Q2 FY’16 Earnings Preview: Recovery In Top-line Likely To Be Weak
• Chipotle Mexican Grill Struggles in Q1 FY’16 As Last Year’s E.coli Controversy Impacts Comparable Sales
• Chipotle Mexican Grill FY 2015 Earnings Review: E.Coli Scandal Hinders Top-line Growth
• What’s Chipotle Mexican Grill’s Fundamental Value Based On Expected 2016 Results?
• What Is Chipotle Mexican Grill’s Revenue and EBITDA Bridge?
• How Has Chipotle Mexican Grill’s Operating Metrics Changed Over 2011-2015?
• Where Will Chipotle Mexican Grill’s Revenue and EBITDA Growth Come From Over The Next Three Years?
• Chipotle Mexican Grill Q1 FY’16 Earnings Preview: E.coli Scandal Might Still Impact Top-line Growth

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