The second half of 2015 represented a turning point for Chipotle Mexican Grill, Inc. (NYSE:CMG), but not in a good way. As we all remember, the company’s restaurants were involved in two E.coli outbreaks, which affected dozens of people. The outbreaks did not cause any complications and no deaths were reported in the outbreaks, but it put a strain on Chipotle’s financial results. Following the outbreak, NPD Group, which tracks consumer awareness about food safety outbreaks said that teen and young adult customers had not been discouraged from eating at Chipotle restaurants, which was a good sign, since this demographic represents the largest share of the chain’s traffic. However, even though the youth’s brand loyalty was unshaken by the outbreaks, Chipotle Mexican Grill still posted a 14.6% comparable restaurant sales drop in the fourth quarter of 2015, which included a 30% decline in December.
Following the food safety issues, Chipotle, one of the largest Mexican restaurant chains in the US, embarked on a campaign to try and bring back the lost customers or attract new ones. One of the key aspects of its new marketing campaign was giving away lots of free food. In March it launched an online game, ‘Guac Hunter’, which involved spotting differences between two similar images and rewarded winners with a free order of chips and guacamole. On July 1, 2016, Chipotle launched Chiptopia, a new customer frequency program, which had three levels: Mild, Medium and Hot. Customers that spent at least $6 before tax in four visits were awarded the Mild status and a free entrée, while the highest Hot level rewarded customers with up to nine free entrées and a $240 ‘Catering for 20’ Bonus Reward.
In September, Chipotle offered free fountain soft drinks or iced tea for all college and high school students and customers with kids were offered a free kid’s meal with the purchase of an entrée every Sunday. Earlier this year, Chipotle announced a new online game, ‘Cado Crusher’ with also free orders of chips and guacamole as prizes. Aside from campaigns, the company also gave away coupons for free burritos. In February the company had an online promotion with 5.3 million people downloading the mobile coupon and 2.5 million redeeming the offer and in March it sent 21 million direct-mail coupons.
On the next page, we are going to see how these promotions affected the company’s financial results and what plans Chipotle has for the current year.