Chipotle’s marketing and menu strategy just may be paying off
Something happened in the first quarter that hasn’t happened in quite some time — Chipotle reported negative same-store sales and traffic. You’d have to go back to the throes of the pandemic to find its last negative quarter. Chief executive officer Scott Boatwright cited an elevated level of uncertainty around the economy for such results.
“The underlying trend is tied to the consumer sitting on the sideline,” he said during the company’s earnings call in late April.
Boatwright, however, reiterated his confidence that the business will be back in positive territory by the second quarter and laid out his plans on how, including ramping up the chain’s marketing spend to reach more guests.
Since then, an accelerated marketing cadence has been clear — Chipotle has launched an NBA promotion, an NHL promotion, a golf promotion, a tattoo promotion, a promotion in partnership with musician Alex Warren, and another “Lipotle” promotion with Wonderskin.
Further, in May, Chipotle introduced its Summer of Extras campaign, including more than $1 million in free burritos for loyalty program members. The campaign runs through Aug. 31 and offers “milestones” after certain purchases, which can then be translated to free food.
The recovery plan also included adding a rare third limited-time offering. Historically, Chipotle promotes two LTOs each year — one in the fall and one in the spring — and they are usually new proteins.
This year, the company also added its first new dip in five years. The Adobo Ranch Sauce hit restaurants for a limited time June 17 for 75 cents.
This marketing/menu strategy just may be working. Traffic data firm Placer.ai shows that monthly visits to Chipotle year-over-year improved from -4% in April to 0.6% in May. In June, when the new sauce was launched, year-over-year visits jumped by 5.3%.
In a note, William Blair analyst Sharon Zackfia wrote that the Adobo Ranch “seemed to yield both improved traffic and ticket given the associated upcharge.”
However, Zackfia cautions of another tough quarterly report ahead with expected comp sales declines of 3% to 3.5%. Zackia notes that, like Chipotle’s traffic trends, comp sales also strengthened as the quarter progressed, but not enough to impact Q2 numbers. Traffic and comps have since both turned positive so far in the third quarter, she added.
We will get a better idea of whether these efforts turned things around from that soft first quarter on July 23, when the company reports its second quarter results.
Contact Alicia Kelso at [email protected]
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