Jul 26, 2019
All About Chipotle’s Turnaround
Technology is key to the company’s new sales strategy.
With 2,500 stores around the country and a market cap of $20 billion, Chipotle Mexican Grill (CMG) has built its success on tacos, burrito bowls, and guacamole.
But just a few years ago, the company’s sales were falling as food safety issues hurt Chipotle, and as customers sought Tex-Mex alternatives. Now the burrito chain has reportedly engineered a turnaround, with sales and the company’s value rising.
Here’s a quick look at Chipotle then and now.
CMG Q2 Earnings
- In the second quarter of 2019, sales increased 13.2% to $1.4 billion compared to the same quarter in 2018, according to Chipotle’s earnings report.
- Chipotle’s profit in the second quarter nearly doubled to $91 million, compared to the second quarter of 2018.
- The burrito chain said its same-store sales for the second quarter of 2019 increased 10% compared to the second quarter of 2018, according to its most recent earnings report. Same-store sales refer to a comparison of stores open at 12 months or longer.
- New chief executive Brian Niccol, formerly the CEO of Taco Bell, has aggressively pursued digital sales, according to reports. That includes a partnership with DoorDash, the app-based food delivery service, which features free delivery. Chipotle reported a nearly 100% increase in digital sales in the quarter, accounting for 18% of total revenue in the quarter.
- At $17, digital sales are reportedly about 42% higher than an average in-store sale of $12.
- The average check price increased 3.5%, according to reports, driven by price increases on menus.
- The rising costs of food and beverage items, primarily avocado and dairy products, cut into profits during the most recent second quarter, according to reports.
Some Chipotle history
- Chipotle was founded in 1993 by Steve Ells, at a single location in Denver, Colorado.
- It quickly became one of the fastest-growing fast-casual food businesses in the country, with the help of McDonald’s, which became a 90% owner until 2005, when it sold its stake back to the company.
- Between 2014 and 2015, the company grew very quickly, reportedly adding hundreds of new stores, and hiring thousands of new workers.
- More than 500 people across the country became sick from e. Coli and other pathogens that contaminated food in various Chipotle restaurants in 2015.
- In 2016, at the height of the concern about food safety issues, sales plunged 44% in the company’s first quarter. Earnings problems haunted the company through 2017.
- As part of its recovery plan, however, Chipotle overhauled its food processing and production, according to reports, including centralizing more of its food preparation, and conducting early tests for pathogens in the fresh produce destined for its stores.
- By mid-2018, Niccol had engineered a recovery for Chipotle, with customers returning and sales rising, according to reports.