JULI AN GROSS

CHIPOTLE 1

EXECUTI VE SUMMARY

Chipotle Mexican Grill has recently experienced some of its worst media

coverage ever about outbreaks of E. coli and norovirus, sickening hundreds of people

across the country. Customers have questioned the safety of Chipotle’s fresh foods,

with fears of another outbreak or health crisis. Sales have dropped and investors are

angry, feeling the company misled them in ensuring that their food was safe.

The Mexican food chain must construct an organized communications plan

company-wide to rebuild trust among customers and investors, to realign with the

company’s mission statement of “food with integrity.” With the right communications

tactics, targeting customers and investors, Chipotle can once again be the fast food

company customers can rely on to produce food with integrity.

BACKGROUND

Chipotle Mexican Grill, commonly known as Chipotle, is a Mexican fast food

chain operating in over 2,000 restaurants across five countries. The company

specializes in fast food Mexican cuisine, particularly mission style burritos, tacos, burrito

bowls, guacamole and margaritas (Chipotle Annual Report, 2015). Chipotle opened its

first store in 1993 with the goal of being “food served fast that didn’t have to be the fast-

food experience.” Chipotle’s brand centers around fresh ingredients, unique cooking,

and an “exceptional experience” (Chipotle, 2016).

SI TUATI ON ANALYSI S AND OUTCOME

Recently, Chipotle’s brand has been called into question as a result of the E. coli

and norovirus outbreaks that sickened nearly 500 people across 12 states (FDA.gov,

2016). The outbreaks have driven away customers, sales, and investors, and damaged

the company’s reputation. Chipotle’s health crisis has been one of the most publicized

food safety stories of the past few years - leading customers to question the safety of

major brands and sourcing from small producers (Healthy Dining Trends, 2016).

Chipotle’s business sales were down as low as 37 percent in some stores because of

the outbreak, and investor sales were down 30 percent (Neate, 2016).

Chipotle was accused of being misleading to customers and investors, causing

many to lose trust in the brand. Chipotle's mission statement “Food with Integrity” is now

called into question, and the company is facing lawsuits from investors over accusations

of false statements by CEO Steve Ells about Chipotle’s food safety during the outbreak

(Neate, 2016). In December, Steve Ells began speaking to the media on the “TODAY

Show” and “Mad Money” to discuss what was happening with the E. coli and Norovirus

situation (CNBC, 2015; TODAY, 2015). Chipotle is expected to report its first-ever

quarterly loss since going public, during Q1 2016 (Krantz, 2016).

According to a survey by William Blair analyst Sharon Zackifa, consumer

sentiment towards Chipotle was at its

lowest in January, when stock prices also

hit a 52-week low (Sozzi, 2016).

February 1, 2016, the CDC announced the

end of Chipotle E. Coli outbreak. The CDC

CHIPOTLE 3

concluded, “The epidemiologic evidence collected during this investigation suggested

that a common meal item or ingredient served at Chipotle Mexican Grill restaurants was

a likely source of both outbreaks. The investigation did not identify a specific food or

ingredient linked to illness” (CDC, 2016). In efforts to regain public trust, Chipotle closed

its doors for four hours on February 8, 2016, to hold a virtual meeting. In the meeting,

CEO Steve Ells provided transparency for employees and media alike on the current

state of the health outbreak, and new food safety policies going forward.

Ells then announced a “$10 million program to assist local food suppliers in

complying with its new safety guidelines” (Mohan, 2016). This bold initiative had a

positive impact, showing how Chipotle is taking proactive steps to ensure that its food is

safe and to improve its current practices. Although the closure came at a large cost, it

was well received by customers, showing the company will put its customers’ safety

ahead of profit. This also gave Chipotle more positive media coverage, which it

desperately needed following 2015 (Barnett, 2016).

Chipotle stores affected by E. coli reopened during the week of April 11, 2016,

and the company still needs to regain the trust of its customers and investors to avoid

further losses. The outbreak has been one of the most widely covered food crises in

history because of the continual series of missteps, leading to greater public awareness

of the outbreak and mistrust among the public (Erbentraut, 2016). Where a lack of food

safety emphasis was seen throughout the crisis, a focus on food safety and trust in the

brand will help bring Chipotle back from its damaging year.

GOAL

Rebuild customer and investor trust of Chipotle following the recent outbreaks of

E. Coli and norovirus.

OBJECTIVES

Generate positive media coverage of Chipotle in the next three months

Increase publicity of food safety efforts and facts on the website and social media

Create positive brand association with Chipotle

TARGET AUDI ENCES

CUSTOMERS

Chipotle’s customers, according to its CEO, “are millennials who would skip fast

food in favor of restaurants like Chipotle.” Millennials, ages 23 to 36, make up about 20

percent of the U.S. population. Millennials prefer quality over price, which is why they

are more likely to eat at a Chipotle rather than a traditional fast food restaurant (Jones,

2014). While restaurant customers may tend to choose competitors originally after such

an outbreak, they typically come back after a short period of time (Gandel, 2016).

Chipotle customers have “more disposable income and are more health-

conscious than the average fast-food customer,” according to branding expert Rob

Frankel (Fottrell, 2016). Millennials are easy to reach by social media but prefer a

meaningful interaction on social media or a recommendation from a peer rather than

traditional advertising (Mintel, 2015).

CHIPOTLE 5

INVESTORS

Chipotle (CMG) is traded publicly on the New York Stock Exchange (NYSE).

Chipotle first went public in 2006 and the value has grown to over 3,000 times the

original value during the IPO (Investopedia). To date, Chipotle’s 52-week high in stock

price was $758.61 and the low was $399.14 in

January 2016 after the health crises (Chipotle,

2016). The company’s shares fell 29 percent in

2015, making it one of the worst performing

restaurant stocks that year, and investors

continue to worry about the company’s future

(Gandel, 2016). Chipotle will soon raise its prices, due to rising food costs, but it is not

expected that this will drive away customers and is appealing to investors (Fottrell,

2016).

INTERVENING PUBLIC: THE MEDIA

The media has had a large impact on the

outcome of Chipotle’s health crisis – a large drop

in sales and stock prices. Chipotle has accused

the media of helping “fan the crisis” before all the

facts were available (Wahba, 2015). Keeping a

good relationship with the media to reach

customers and investors is key to maintaining a positive image. During Chipotle’s four-

hour shutdown, Steve Ells invited a few reporters to sit in on team meetings to see

firsthand what the company would do going forward to remedy the E. Coli situation

(Mohan, 2016).

RECOMMENDED COMMUNI CATI ONS STRATEGI ES AND TACTI CS

Chipotle needs a strong communications strategy to reach its customers and

investors to ultimately raise its bottom line. Chipotle must reverse the narrative of

mistrust and unsafe food that has been in media over the past year, and more

effectively communicate the steps it is taking to ensure safe, fresh food to its customers.

While Chipotle has made several mistakes in the handling of the E. coli outbreak, it is

without a doubt that the company will be able to bounce back in due time. Some

recommended strategies and steps for strengthening Chipotle’s communication with its

customers, investors, and the media are as follows.

SOCIAL MEDIA

In the social media realm, Chipotle is in a class of its own. A 2011 Nation's

Restaurant News study found that Chipotle responds to 83% of Facebook posts and

90% of Twitter customers through @-mentions (Klamm, 2012). The company’s social

media strategy focuses on highly engaging, personalized responses. According to

Chipotle’s New Media Manager, Joe Stupp, “likes and retweets are great, but what

matters most to Chipotle is genuine conversations with customers” (Klamm, 2012).

When word got loose of Chipotle’s E. coli outbreak, social media responses were much

different, often passive at best.

In the early stages of September 2015,

Chipotle responses on social media were

defensive, asking followers to consult a doctor or

reassuring frantic followers that it is safe to eat at

a Chipotle. The company withheld information for

CHIPOTLE 7

several months before letting the public know the severity of the issue, which was a

major misstep in the company’ social media strategy (Bradley, 2015).

Explain what measures have been taken to remedy the situation.

Post updates as they occur – develop a fun infographic with a report card design

and show updates and accomplishments.

Posting positive press stories on the website and social media such as retweeting

and sharing stories of share increases, new policies, etc.

Monitoring social media more frequently to dispel negative comments about the E.

coli situation to address trolls and negative comments with positive comments and

include positive news links where applicable.

Continue to respond to followers, but with positive responses rather than defensive

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Millennials are likely to choose a brand that they feel engage in a meaningful and

targeted way (Mintel, 2016). By highlighting all of the efforts Chipotle has taken and

appropriately targeting customers, it will help rebuild trust among millennials, who more

highly value CSR over the older generations (Mintel, 2015).

Create a “Meet the Chipotle Team” video to show every step of the production

process from farm to burrito, including all the safety measures taken.

Condense the above information into an infographic which can be shared on social

media and Chipotle’s website.

Develop a new “Food with Integrity” video. The video begins with a sincere apology

from CEO, Steve Ells and shows the progress Chipotle has made since September

2015 and future steps the company will take.

Highlight current CSR efforts, such as the $10 million food-safety investment.

TRADITIONAL MEDIA

Chipotle’s media coverage of the past year has been overwhelmingly negative.

Chipotle’s health crisis was one of the largest publicized food safety crises in history –

not only causing a negative image of the brand, but also causing a larger amount of

people to be skeptical of the brand. Positive, transparent media coverage will reach

customers and investors alike and help rebuild the damage caused by the crisis.

Offer more interviews with high-level officials.

Include media in the conversation with Chipotle officials to show transparency and

gain more news coverage.

During the Chipotle meetings in February only two reporters were present

(Mohan, 2015).

Include some sort of science professional when giving interviews on talk shows or

other multi-person platforms.

In the “TODAY Show” and “Mad Money” interviews, Steve Ells and his VP

were present. An epidemiologist should have been present as well to offer

expert testimony and add to the credibility of the CEO and VP.

LEADERSHIP TRAINING

Because of the need to have more high-level Chipotle officials in the media, a

key component to make this strategy effective will be leadership training.

The CEO and other C-level officials need to step up and speak about the cause of

the E. Coli outbreak and the successes following.

Position the CEO and public health professionals upfront to speak to TV and print

media about what happened to cause the outbreaks.

Show that the high-level officials are taking personal hits because of the crisis.

CHIPOTLE 9

CEO still making $14M after pay cut, but suspended all bonuses for

executives after outbreak.

INVESTOR RELATIONS

Chipotle will soon have to report its first-ever quarterly losses to investors. In

order to ease investors’ worry, the financial officers must reassure that Chipotle’s stocks

are on the rise and customers are returning.

Issue a press release with realistic expectations and a positive quote from Steve

Ells – relaying the bad news but reassuring the steps the company is taking to

improve upon this in upcoming quarters

Cover bases with internal communications by letting employees know where

footage of the call is located and allowing them to participate if they choose.

Annual report – compare how reporting is before and after the crisis and see

what the numbers look like.

Offer in-person meetings to provide facts and reassurance for concerned

investors.

APPLICATION

Remodel Chipotle application

Add new features such as a CSR and news section

Promotions, such as a rewards feature where customers can earn a free

burrito/bowl after nine purchases.

Offer pop-up notification options for when promotions are occurring or

there is positive news to be reported.

MEASUREMENT AND POST-PLAN RECOMMENDATI ONS

In order to ensure a successful campaign, the steps taken to improve

communication with customers and investors must be measured for their effectiveness.

The measurements will be reported to company officials and investors, and the

communications to know the effectiveness of their work. The campaign will be

measured in the following ways:

SOCIAL MEDIA MONITORING

Social media is a large part of the campaign, and all social media tools offer

analytics measuring engagement, followers, location, reach, and the usefulness of the

outlet. Social media can be monitored daily, weekly, monthly, and yearly. The social

media strategy will be adjusted according to what is working and what is not.

MEDIA ANALYSIS

A comprehensive analysis of the positive and negative media coverage of

Chipotle will be measured daily. The analysis will track Chipotle mentions and the

outlets the company is covered in. Data will be pulled bi-weekly to see what outlets

need to be targeted and where coverage needs to improve.

SURVEYS

A pre-campaign and post-campaign survey taken by customers will measure

Chipotle’s brand image and perception. The survey will be posted via social media,

email, and on the Chipotle app. Customers that complete the survey will receive a

coupon for a free beverage or side item.

BENCHMARKS

One of the key ways to measure Chipotle before, during and after the crises will

be benchmarking sales and customer perception of the brand. Each of the above tools

CHIPOTLE 11

will be used to measure how Chipotle compares to its previous months and years to

make projections for the future.

SWOT ANALYSI S

STRENGTHS

Personalized social media

engagement with customers

Customer loyalty

Large social media following

Partnership with local farmers to

use fresh foods

Commitment to health brand by

getting rid of GMOs and carnitas when they countered mission statement

WEAKNESSES

Current reputation following health

crises

Lack of ownership for current crisis

Crisis directly counters the brand’s mission statement

Negative media coverage

Recent falling sales and stock

prices

Waited too long to address health crises

OPPORTUNITIES

Highlight food safety efforts on social media

Increase CSR efforts

Offer more direct interviews with

high-level officials to show transparency

Improve media coverage overall

THREATS

No guarantee that another food safety outbreak will not happen

since the CDC was unable to pinpoint exactly where the

outbreak originated

Customers have turned to competitors as a result of the crisis

Lawsuits from investors

The company doesn’t know where

the food contamination began

Falling stock prices

REFERENCES

“2015 Annual Report and Proxy Statement.” Ir.chipotle.com. Dec. 31, 2015. Accessed April 20, 2016. http://ir.chipotle.com/phoenix.zhtml?c=194775&p=irol-reportsAnnual

Barnett, Tyler. “Chipotle Knows What It's Doing By Closing its Stores.” Fortune.

February 10, 2016. Accessed April 24, 2016. http://fortune.com/2016/02/10/chipotle-temporarily-closing-pr/

Bradley, Diana. “Chipotle doesn't have much to say about E. coli outbreak.” PR Week. November 2, 2015. Accessed April 23, 2016.

http://www.prweek.com/article/1371039/chipotle-doesnt-say-e-coli-outbreak CNBC. “Chipotle Co-CEOs: Implementing Food Safety Innovation.” December 17,

2015. Accessed April 23, 2016. https://www.youtube.com/watch?v=mzDxIj047n8

Erbentraut, Joseph. “What Chipotle Needs to do to Win Back its Customers.” February 1, 2016. Accessed April 20, 2016. http://www.huffingtonpost.com/entry/chipotle-food-safety-is-it-safe-now_us_56afa7e2e4b0b8d7c23014a0

“FDA Investigates multistate outbreak of E.Coli O26 Infections Linked to Chipotle

Mexican Grill.” FDA.gov. February 1, 2016. http://www.fda.gov/Food/RecallsOutbreaksEmergencies/Outbreaks/ucm470410.htm

Fottrell, Quentin. “Why Chipotle customers will eat higher prices.” MarketWatch. April 18, 2016. http://www.marketwatch.com/story/why-chipotle-customers-will-eat-higher-

prices-2014-04-18 Gandel, Stephen. “Here’s Why Chipotle Investors Continue to Feel the Pain.” Fortune.

January 6, 2016. http://fortune.com/2016/01/06/chipotle-stock-drop/

“Health Dining Trends - March 2016.” Mintel. March 2016. Accessed April 11, 2016. http://academic.mintel.com.proxy.library.georgetown.edu/display/766154/

Investopedia. “If You Had Invested Right After Chipotle’s IPO.” Investopedia.com. Accessed April 22, 2016.

Jones, Adam. “Who are Chipotle’s Customers?” December 18, 2014. Market Realist. Accessed April 22, 2016. http://marketrealist.com/2014/12/chipotles-customers/

Krantz, Matt. “Profit goes poof: Chipotle faces first-ever loss.” USA Today. April 11,

2016. http://www.usatoday.com/story/money/markets/2016/04/11/profit-goes-poof-chipotle-faces-first-ever-loss/82796194/

CHIPOTLE 13

“Multistate Outbreaks of Shiga toxin-producing Escherichia coli O26 Infections Linked to Chipotle Mexican Grill Restaurants (Final Update).” CDC.com. February 1, 2016.

Accessed April 22, 2016. http://www.cdc.gov/ecoli/2015/o26-11-15/index.html

Neate, Rupert. “Chipotle faces an uphill battle to win back reputation after E. Coli outbreak.” The Guardian. January 9, 2016. Accessed April 22, 2016. http://www.theguardian.com/business/2016/jan/09/chipotle-norovirus-outbreak-profi t-

plummet

Pavithra, Mohan. “What We Learned During Chipotle's First Company-Wide Food Safety Meeting.” Fast Company. February 8, 2016. Accessed April 22, 2016. http://www.fastcompany.com/3056461/fast-feed/live-updates-from-chipotles-

unprecedented-company-wide-meeting

Sozzi, Brian. “Chipotle Customers May Finally Be Ready to Return.” The Street. April 8, 2016. http://www.thestreet.com/story/13523746/1/chipotle-customers-may-finally-be-ready-to-

return.html

TODAY. “Chipotle Founder Steve Ells Addresses Series Of Outbreaks.” YouTube. December 10, 2015. Accessed April 23, 2016. https://www.youtube.com/watch?v=Oeapkmn-xIQ

Wahba, Phil. “Chipotle is Blaming the Government and the Media for Their E. Coli PR

Nightmare.” Fortune. December 8, 2015. http://fortune.com/2015/12/08/chipotle-media-ecoli/