Chipotle: Diving to the Middle of the Burrito
Chipotle’s foundation is built upon its mission of “Food with integrity.” With an array of 2300 stores across the United States, Chipotle is aspiring to be one of the most healthy and influential businesses in the modern era. Steve Ells, Chipotle’s original founder, and co-CEO, intended the company to create, produce, and manufacture locally. From day one, Ells remained committed to serving food that is ethically and naturally produced (Page). Famously known as the ‘Burrito Empire’, Chipotle has purposefully had an incredibly integrated and diligent marketing strategy. Chipotle, positioned for prosperity, uses its history and growth to reflect upon its business portfolio, and through these sustainable company practices, Chipotle’s impact on the consumer experience is astronomical.
Mission, History, and Growth of Chipotle
Bubba: Chipotle’s mission is to deliver the highest quality food to everyone. They stress their loyalty to providing fresh vegetables and free-roaming animals for their meat. The company states in its “Our Values” page on its website that they are committed “to vegetables grown in healthy soil, and pork from pigs allowed to freely root and roam outdoors or in deeply bedded barns.” (citation) They also want to relate as closely to their customers as possible, stating, “We're committed because we understand the connection between how food is raised and prepared, and how it tastes...With every burrito we roll or bowl we fill, we're working to cultivate a better world,” (citation). What sets Chipotle apart from other restaurants is its use of ingredients with no added colorings, flavors, or preservatives. By doing this, they end up spending more time and money. Nevertheless, they achieve that high-quality standard that they do so crave by doing so.
In 1993, a man by the name of Steve Ells opened the first Chipotle restaurant. Taking what he learned from the Culinary Institute of America, along with his skills developed as a line cook at Jeremiah Tower at Stars in San Francisco, he hit the ground running. In order to be profitable at the Denver, Colorado establishment, they needed to sell at least 107 burritos a day. After one month, they were selling over 1000 burritos daily. The history of Chipotle is one of only a single blemish. This blemish, however, is more of a dramatic scar in the company.
From late 2015 to early 2016, multiple customers of Chipotle establishments across the country were sent to the hospital as a result of an E.coli outbreak. This made the stock value of Chipotle decrease by nearly 50% within two months. They also reported a 13.3 percent drop in revenue in 2016 to the previous year and a drop in net income from $475.6 million in 2015 to $22.9 million in 2016 (citation). Though they experienced quite the loss in the few months transitioning from 2015 to 2016, they’ve come back strong by raking in their greatest revenue in their history this past quarter at $1.434 billion (citation). Their net income, though not back to 2015 numbers, is climbing back up. The future for Chipotle is bright. With new menu items and growing financials, this company has much more to offer the public in the coming years.
Caitlin: Chipotle has capitalized on its commitment to creating “Food with Integrity.” The company uses “Food with Integrity” to focus on issues of sustainable food and human farming conditions. The campaign emphasizes the importance of transparency and sustainability within the food industry. Chipotle’s commitment to “Food with Integrity” has launched many campaigns in an effort to cultivate a better world.
To promote the future of food with integrity Chipotle launched the Chipotle Aluminaries Project. This project was designed to “drive positive change in the food industry by offering eight growth-stage ventures the resources needed to grow and make a positive impact at scale” (Schalow). Brian Niccol, chief executive officer at Chipotle spoke about the Chipotle Aluminaries Project, sharing “By sponsoring the Chipotle Aluminaries Project, we’re looking to advance the work of the next generation of entrepreneurs who are disrupting the food landscape.” Chipotle’s investment in the customer-generated marketing project was designed to be a platform to create momentum and change.
Chipotle, in an effort to reduce its environmental footprint, unveiled its Gloves to Bags Campaign. Chipotle identified that “95% of all gloves used in restaurants end up in a landfill,” (citation). Due to the lack of options to recycle gloves, “Chipotle teamed up with Revolution Bag in Salinas, California to start a pilot program turning plastic gloves into trash bags,” (citation). The goal of the Gloves to Bags Campaign was to make Chipotle a more sustainable company and increase its transparency. In addition, Chipotle has vowed to reduce waste by 50% by 2020.
Chipotle unveiled its “Behind the Foil” campaign to publicize its commitment to transparency. The documentary-style video series features behind-the-scenes footage of Chipotle restaurants to “pull back the foil.” The very relevant campaign produced a lot of buzz around Chipotle's commitment to being transparent with how they prepare and get their food. Chipotle capitalizes on its ability to create ads that get people talking about it, which in turn moves toward change.
SWOT: Company Analysis
Daisy: Chipotle Mexican Grill serves as one of the most recognized, fast-casual chain restaurants in the United States. Because of its popularity among fast food chains, Chipotle continuously faces a risk of external threats and or opportunities that either reflect poorly on the company or in some cases, benefit the company. These external forces are categorized as Threats and Opportunities, and a Company’s response to these forces either highlights an internal strength or weakness of the company. This breakdown is commonly known as a SWOT analysis, evaluating the Strengths, Weaknesses, Opportunities, and Threats of a company.
Chipotle was founded in 1993, but the company went public in 2006. After going public, Chipotle has grown very quickly and has reported positive annual revenue and earnings growth every year since its IPO. Over the years, exemplified strengths of Chipotle include rapid growth, good financial strength, fresh ingredients, and innovative outlooks. For example, In 2015, Chipotle was threatened with an E.coli outbreak and a total of 55 people were hospitalized and reported as infected after eating at Chipotle. This outbreak threatened Chipotle’s reputation and one of its main core values of the company, to serve fresh and quality ingredients. Chipotle lost many loyal customers but retaliated against this threat by improving its food safety practices. Chipotle planned to commit $10 million to help local farmers to meet its food and safety standards and started using DNA testing to identify harmful bacteria before they enter its supply chains. (Publishing) Ironically, this also reflected poorly as one of Chipotle's weaknesses. Because Chipotle prided itself in serving safe, fresh food, its values were being questioned by scared customers. Chipotle focused too heavily on safer food production and practices, that they were failing to restore trust in their customers. After this, many customers stopped purchasing from Chipotle and this resulted in Chipotle losing millions of dollars worth of potential profit from customer equity.
Chipotle faces opportunities and threats every day. Forces from the macro-environment and the company's responses to these forces shape Chipotle's volatility in the market. Chipotle needs to stay updated and constant with these forces and trends in order to survive. Not just to survive, but so Chipotle can maintain a constant state of optimization. Chipotle fails to take on two main opportunities: Expanding internationally and entering a new product market. Aside from a few restaurants in Europe and Canada, Chipotle fails to expand into emerging, international markets. Also considered as a weakness, another opportunity for Chipotle is to enter a new product category. Because Chipotle has a very limited menu, the company could focus on other Mexican dishes that could expand sales. Currently, Chipotle offers a small selection of burritos, tacos, burrito bowls, and salads.
One of the largest threats that Chipotle faces is its competition. The fast food market is highly competitive and requires constant adaptations as the macro environment changes. Primary competitors include other franchises and local family-owned restaurants. Taco Bell and McDonald’s are considered to be Chipotle's top fast food competitors, which offer low prices and more convenience as most of these restaurants have drive-throughs, unlike Chipotle. (Department)
Chipotle strives to excel in the fast food market by adapting to the external forces that shape the market. Chipotle aims to promote company strength and leadership, but at times this can be misconstrued by society as weaknesses. To achieve optimization, Chipotle must assess each strength, weakness, opportunity, and threat the company faces and improve in these areas to create a better name and brand for the company.
Chipotle: Segmentation, Targeting, and Positioning Strategies
Michael: Chipotle studies demographics and behaviors in order to further develop the company’s success and goal of hitting specific markets. Although popular among several groups of people, millennials, born between 1982 and the early 2000s, have become the primary customers in Chipotle restaurants (Diego). In order to persuade millennials into going to and or returning to their restaurant, they advertise the idea of a fresh and healthy meal. While they avoid the typical forms of advertising, television (only had one) and written (newspaper), Chipotle does a great job of commanding a strong online and social media presence. In order to capture and preserve the audience it is intending, Chipotle is focusing simply on food sourcing and its organic methods for producing food. In between caring for their customers and caring about what they consume their bodies, Chipotle does an excellent job of putting the customer first, and truly addressing their needs (Diego).
Known as one of the most successful restaurants in the “fast casual” industry, Chipotle is consistently making a dent in the global market, forcing people to question the food they put into their bodies from other businesses. Located heavily in urban, developing areas, healthy conscientious people find Chipotle perfect for providing alternative food items. The customer will sleep happy at night, after a meal from Chipotle, knowing that the items put into their body, will not harm them because they are GMO-free, Cage Free, and locally farm-grown (Diego).
Strong brand loyalty and regular customers are only some of the factors to attribute to Chipotle’s success. Word of mouth, instead of traditional advertising, has proven to help Chipotle thrive in this marketplace. When opening a new Chipotle, Chipotle works with local farmers and producers to provide the freshest ingredients and vegetables, in order to promote local businesses. This action in turn promotes the opening of new Chipotle restaurants, as well as promoting locally sourced food (Alhadlaq).
Known for its positioning strategy and philosophy, “Food with Integrity,” Chipotle stands tall for finding the best ingredients, saving the environment, and protecting the animals. Because locally sourced foods supply them with most of their ingredients, Chipotle regularly makes donations of old grills and food processors to help end the use of landfills (Alhadlaq).
Restaurants tend to have promotions throughout the year, in order to promote growth in their community, and in their business chain. Chipotle for example, annually hosts an event called “Boorito”, where discounts are given to customers who are dressed up in Halloween costumes. Similarly, supporting local sports teams and organizations, Chipotle relies on word of mouth to spread its philosophy, “Food with Integrity.”
Trends in the Market
Christian: While Chipotle has done an excellent job at establishing a strong brand, they have also adapted in accordance with current market trends. There are numerous examples of the restaurant chain changing its menu, sales, or general company policies to improve potential consumers’ perception of the company. Recently, Chipotle has made it a priority to promote healthier eating, environmental sustainability, and technology use. Marketing has evolved in the sense that having a great product is not enough anymore, and Chipotle has not only dealt with this shift but has used it to its advantage.
One of the biggest trends across the restaurant industry, in general, has been consumers making more health-conscious choices when ordering. In an article in Forbes Magazine, Nancy Gagliardi says “All demographics—from Generation Z to Baby Boomers--say they would pay more for healthy foods, including those that are GMO-free, have no artificial coloring/flavors and are deemed all natural” (Gagliardi). In response to this, Chipotle has placed an emphasis on their salad bowls, introducing “Lifestyle” bowls that satisfy the Keto, Paleo, and Whole30 dieting techniques. Additionally, Chipotle’s advertisements have started to focus on the quality of their ingredients. Chipotle prides itself on non-gmo ingredients and went as far as saying in a recent commercial, “The hardest ingredient to pronounce at Chipotle is Chipotle,” (citation).
Another massive change in the restaurant industry, specifically in regard to fast food, is the surge in delivery sales. Chipotle has been conducting research and testing different strategies in their restaurants to reduce friction for delivery services, whether it be their own app or third-party services. While convenience and speed were once a luxury, it is now a necessity for some consumers, and Chipotle has changed accordingly. In addition to their focus on the efficiency of delivery, they have introduced “Chipotlanes,” where customers can simply pay on their mobile device and pick up their food without leaving their car (citation). Initial results of these Chipotlanes have been very promising and Chipotle is looking to implement this technique in multiple locations.
Particularly with millennials and Generation Z, there has been an increased awareness in regard to the environment. Food waste is obviously a major issue with all restaurants, and it will probably never be eliminated altogether, but Chipotle has set the lofty goal of increasing its waste diversion rate to 50% percent. To achieve this goal, Chipotle has trained staff not only to prepare food in the right quantities but also what other materials can be reused and recycled. Additionally, Chipotle has vowed that by 2020, 80% of its restaurants will participate in the Harvest Program, which donates leftover food to community organizations (citation). Whether it be recycling, composting, or donating, Chipotle is undoubtedly using the societal marketing concept to its advantage.