Chipotle CEO Says E.coli Crisis Will Hurt Its Business Through 2016
Come next month, you can expect aggressive marketing from Chipotle Mexican Grill (CMG), imploring you to come back and give the burrito chain another chance.
Chipotle’s sales and stock price have been battered since November by a series of food safety disasters, most notably an E.coli outbreak in the Pacific Northwest that sickened dozens of customers and temporarily shuttered stores in the region. To mend fences with customers, it’s planning a major ad campaign during what is usually a quiet time of the year on the marketing front.
The message? The Chipotle you know and love is back and safer than ever.
The company is scrambling to put this crisis behind it, and it recognizes that the E.coli crisis will slam sales through 2016.
“We face these difficult times now and need to reassure our customers that this can’t happen again and that we’re going to reduce the risk of this kind of outbreak from occurring again to near zero,” Chipotle co-CEO Steve Ells said on a web cast on Wednesday from the ICR conference in Orlando, Florida.
Last month, after initially blaming the media and the government for the crisis, the company purchased full page ads in major newspapers in an attempt to win customers back. And right before Christmas, Chipotle announced new food safety practices that it has admitted will hurt its profit margins.
But those efforts have been hampered by a second possible outbreak being probed by the Centers for Disease Control and Prevention (CDC), a norovirus incident at a Boston restaurant that ultimately struck more than 100 diners, and news last week that it got a subpoena related to a criminal federal probe into a norovirus outbreak at a California location. In December, sales at Chipotle locations open at least a year fell 30%.
So, anticipating no new disaster between now and February, Chipotle is launching an intensive ad campaign, unusual for this quiet time of the year, including direct mail. The campaign will also target Chipotle’s most regular customers with a “detailed story of what happened” to explain to diners why they are safe.
Paradoxically, the ads will not discuss food safety but will have “an undertone” of humility, Ells said.
While Ells and his executive team attempted to soothe investor concerns over Chipotle stock’s nearly 40% drop since the E.coli outbreak, Wall Street analysts peppered the team with questions about the company’s profit levels. Ells said the best way to fix margins will be to get customers back into stores. And he admitted he could not guess how much the fallout will affect financial results in 2016.
What Chipotle really needs to happen is for the CDC to declare the E.coli outbreak over, something the company said it is “extremely confident” will happen “relatively soon,” having met with government officials last week.
“One thing that’s going to give customers some relief is when the CDC calls this,” said Ells. He added: “We’ll emerge from this stronger.”