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Chipotle appears ready to change its marketing

The departure of Mark Crumpacker is a clear indication of where the fast-casual chain is headed, says RB's The Bottom Line.

The Bottom Line

Last week, Mark Crumpacker stepped down as the chief marketing officer at Chipotle Mexican Grill, shortly after the arrival of new CEO Brian Niccol.

The move was hardly a surprise, despite a $600,000 “retention bonus” that Crumpacker was given in January, and has apparently given up with his decision to leave. Outsider CEOs traditionally like to hire their own people in key positions, and the chain is clearly moving in a new marketing direction.

(UPDATE: Chipotle on Tuesday hired former Taco Bell CMO Chris Brandt to be its new chief marketing officer.)

The Denver-based company’s marketing was a strength for years. It largely avoided many traditional forms of advertising and got a lot of attention for viral efforts, such as a sponsored television series and some internet videos.

But that marketing has become a source of criticism, as Chipotle has struggled to convince customers to return to the chain following a series of food safety incidents in 2015.

A year ago, for instance, Chipotle started what was essentially the first national advertising campaign in its history—a campaign that for all intents and purposes should have helped pull back sales. That didn’t happen.

Sara Senatore, analyst with Bernstein Research, called the campaign a “wasted opportunity” last year, in part because the ads fell flat and failed to show pictures of Chipotle's food. And company executives in earnings calls last year painted mixed pictures of the campaign’s performance.

To be sure, other issues were at work in Chipotle’s struggles. The company’s ad campaign last year, for instance, was quickly followed by a data breach and then a Virginia norovirus outbreak that reminded customers of the company’s 2015 problems.

And no company has had to deal with the post-outbreak customer reaction Chipotle has faced, meaning there was no playbook for its executives to follow.

In addition, the chain has expanded aggressively in the past two years, which has probably hurt its unit volumes. Chipotle’s system sales in 2017, in fact, were close to the same level they were in 2015.

Nevertheless, the hiring of Niccol on its own signaled that Chipotle’s board believes the company needs to move in a new direction from a marketing standpoint. Niccol has a strong marketing background, at Procter & Gamble and then at Yum Brands, where he led Taco Bell’s marketing before he was elevated to CEO.

Taco Bell’s biggest strength is in its marketing. Maybe no restaurant chain does as good a job of targeting its specific customers with new products, social media and advertising, and it’s a big reason Taco Bell has thrived over the years.

Taco Bell’s U.S. system sales grew by 5% in 2017, according to Technomic's Top 500 Chain Restaurant Advance Report. It’s now the fourth largest restaurant chain in the U.S., just behind Subway.

A restaurant company doesn’t hire someone like Niccol with plans to stay the course when it comes to marketing.

All that said, this probably won’t be the last change. Maxim Group analyst Stephen Anderson said in a note last week to “expect additional departures in the next few months” and suggested that Yum Brands alumni could make the move to Denver to join Niccol.

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