Everything was going the wrong way for Chipotle when CEO Brian Niccol, a former head honcho at Taco Bell, took the reins in March 2018. The fast-casual chain couldn’t seem to shake off the damage done to its previously strong reputation, financial results and stock-market returns by a rash of food-borne-illness outbreaks nearly 2½ years earlier.
They were wrong. This Aug. 29, the stock set a fresh all-time closing high of $843.64, topping a record set two days prior. Chipotle’s stock, in fact, has soared more than 93% in 2019, compared with the S&P 500 index’s SPX, -0.24% 20% gain. Prior to stage gate, when, for example, queso was added to the menu, Chipotle stumbled. The rollout was rocky, with negative social-media feedback going viral and “surprising” executives.
“It’s not that they have gone away from that approach towards food, but they have broadened their horizons, in part because they’ve gotten past the food-safety issues,” said Mark Kalinowski, chief executive of Kalinowski Equity Research. “A willingness to have new menu items is a dramatic shift for them culturally. There’s more reason, on this front, to go to Chipotle.”“They’re in the news for the wrong reasons a lot less,” said Kalinowski.
“It takes a while for any chain to come back from widespread reports of food-borne illness,” Freier said. “I think the fact that Chipotle changed its whole marketing strategy recently really helped bring it out of its rut. It used to focus on local marketing, but has shifted this past year to national ads to make Chipotle and its branding message more visible to customers.”
“They really aren’t associated with food safety and E. coli issues anymore,” he said. “The food is a piece of the overall experience but not necessarily the No. 1 thing they’re highlighting. They’re taking a holistic approach that’s positive for their business.”