Transcript of Food & Restaurant Marketing Podcast – Episode: Chipotle Goes All In on Food Safety
[00:00:49] Adam Pierno: Today we are talking about something that everybody’s been exposed to, which is a brand that’s near and dear to my heart, Chipotle Fresh Mexican Grill.
[00:01:01] Dan Santy: Fresh Mex.
[00:01:02] Adam: What do we think about their newest turn in their brand strategy? We’ve seen it change from a food resource and clean food, production up and down the vertical production line, to a new strategy that they rolled out this past week.
[00:01:21] Dan: I have to be honest with you, Adam. I think the focus on food safety — it is excessive, I guess would be the best way to describe it. I get it. They had a terrible situation occur to them, so as a brand they’re trying to win their customers back by telling them how safe their food is, but I think, as you phrased earlier, that’s table stakes. I think consumers today expect the food at restaurants to be safe. And they’ve walked away from their core brand values that made them so popular in the first place.
[00:02:01] Adam: Yes. On one hand, I do sympathize with them as a brand because they’ve reached that level of awareness where it’s a double edged sword. Everybody knows who they are, and so everybody sees when they stumble and fall, and they have those mishaps, so I see why they think they need to address it. I agree that they need to address it, but I agree with you that the way they’re doing it is a little excessive, is a great word. Ham-handed-
[00:02:29] Adam: is the word I used here. I guess I just challenge from a branding standpoint going so hard at food safety and putting so many chips on that, because it actually has, in my opinion, more peril than positive.
[00:02:44] Dan: Exactly. Because if you think about it, what caused their problem in the first place wasn’t something they weren’t doing. It was the product that they acquired from the vendor that was tainted, that then tainted their restaurants. That could always happen again. Our food system, the sources of our food, they’re out there in the fields and are handled by hundreds and hundreds of workers, and going through all these different processes before they even ever get to a Chipotle where these food safety measures are in place.
[00:03:18] Adam: Yes, you just triggered a great question. Do you think — pre-incidents, pre-E. coli and pre-food sickness, they were very much into vertical integration of their food sources and better farming, and better sourcing, which was a great position that they really owned, there was very few brands that could compete with them, or had that same level of ownership of that category. And what you just said really triggered something. That failed them. It was the sourced product that got people sick, not their food prep in store which they found some fault with, but only after really careful examination. From what I understand from our work with some clients, those are things that could happen at basically any restaurant, and probably were not the source of the illness. Do you think maybe they would just do better to take accountability for, “Hey, we promised you this careful sourcing and we let you down,” versus this food safety focus, it just-
[00:04:23] Dan: Yes, I do, because — I agree with what you said earlier. Go ahead and address it, but there’s so many channels that that message can live in for those consumers that are very interested in understanding what are they doing for food safety. And you can tip your hat to it. “If you want to know more about what we’re doing to keep our food safe at Chipotle going forward, please go to safechipotlefood.com,” or whatever the case may be, socials a great place to do possibly do it as well. But as a consumer — I’m not their consumer, so I can’t say I’ve never been back. I have not been back. I can’t say it’s because of what happened, but I do think that this over-reaching, messaging about the food safety is — I don’t think it’s probably doing anything from a traffic standpoint because all the research we’ve done over the years about what drives traffic to restaurants, it’s craveability, and that’s what was driving them before. People were craving that product, their value proposition that they had to offer, and the convenience of it all. Without that message, and a reminder of that message, there’s a lot of competitors who can really be stealing share from them right now, quite frankly.
[00:05:43] Adam: Yes. It’s funny when you think about the Chipotle branding, if I went back 18 months and really was honest with myself about my perception of that brand, I can remember thinking, “Is anybody going to be able to stop this juggernaut from just ownership of this position? This high and mighty position?” Whoops. They stumbled and they had this mishap. I think they have done many, many wrong things since then in crisis communication and the way they’ve handled it. If you think back to the Scarecrow video from — was that 2013?
[00:06:22] Dan: Yes, 20. Probably, yes.
[00:06:24] Adam: 2012, 2013? That’s a video that’s depressing, it’s down. I know it ends with an on and up note, but that’s a brand that was — traffic was just crushing it, sales were crushing it, share price was crushing it. They put out this video that, to me, just bummed me out.
[00:06:40] Dan: [laughs]
[00:06:40] Adam: Did not make me want to eat anything ever again. I don’t think I ate for three weeks. And then not only did they survive that, but somehow they managed to make that part of their brand and people loved it, they were lauded for it. That’s how I judge strong brands. They put out something that I deem terrible and–
[00:06:59] Dan: From a messaging stand of point-
[00:07:00] Adam: Yes. The execution was brilliant, and it was a beautiful short film, but exactly, you nailed it. From a messaging standpoint yikes. In my mind, really as a consumer, not as a brand consultant, I just watched it and I was like, “Oh, my God, that’s — I don’t agree with that, I don’t want that.” And they survived. When brands that can do that kind of thing get high fives from the ad media, or from the food and restaurant marketing media, get lauded for that kind of work, see that is an unassailable, brilliant brand that is Nike level. How the mighty have fallen.
[00:07:38] Dan: Yes, that’s what I guess you’d call that. That’s a Teflon brand, right?
[00:07:42] Adam: [laughs]
[00:07:43] Dan: No matter what hits it nothing sticks. What brand doesn’t want to be in that spot?
[00:07:51] Adam: Right, that’s where we all aspire to be.
[00:07:52]Dan: Right, and I think they’re letting that go. Now, we’re not privileged to traffic counts, same-store sale counts right now obviously. They revealed that information, it’s [unintelligible] level perhaps. It’s hard to say. I may be wrong, maybe this food safety message is resonating with customers, but once again, it’s not what the average consumer — that’s not the message that drives consumers. The other thing is that, the good news for brands is that, quite frankly, consumers have very short memories and they also tend to be very forgiving. Look how popular Bill Clinton is and come on. The guy was doing some pretty shady stuff, and yet he’s just beloved and revered for-
[00:08:48] Adam: By a certain segment of voters. [laughs]
[00:08:50] Dan: [unintelligible] certain segment of voters. Thank you for that. Forgive me to the conservatives, I’m not making a political claim here-
[00:08:57] Adam: [laughs].
[00:08:58] Dan: – I’m just speaking to brand loyalty.
[00:09:01] Adam: You’re right. Point well taken.
[00:09:03] Dan: Yes, brand loyalty. I think you got to be really careful not to over reach on this message. Mr. Chipotle, Mrs. Chipotle, I’d encourage you to-
[00:09:17] Adam: Señor Chipotle.
[00:09:18] Dan: Señor Chipotle.
[00:09:20] Adam: Do you think a message like this could actually harm the brand over time? What if there’s another incident? So now you’re focused on food safety, you pushed all your chips in, and you’re there. As we’ve seen through our use of Kantar, and other media measurement tools, their spending is increasing. They basically shut it off the day there was an incident, and then they’ve slowly been ramping it up and testing it again, so their spending is backed up. They are on the radio, they are on an outdoor, I think this is talking about online video now from the article that I saw, as I understand it. And kudos to Dan. We’re big believers in putting your message forward, but let me ask you Dan. Do you think this could have a negative effect? If we say, “We’re food safety. That’s our primary issue, is your health and our food safety, and we guarantee our product.” What happens?
[00:10:13] Dan: Absolutely, because the other thing consumers are very cynical-
[00:10:18] Adam: [laughs]
[00:10:18] Dan: – and not necessarily very trusting of brands in the first place. They want to trust brands, they do trust brands, but when you start beating a drum so hard to try to convince someone they shouldn’t be thinking something else people become very cynical, very quickly. I think you’re right, Adam. There is a negative backlash that could come from this for that consumer who’s like, “Whatever, dude. I’m not coming in. You screwed the pooch.”
[00:10:54] Adam: You can really lose trust in a permanent way.
[00:10:57] Dan: Right, especially-
[00:10:58] Adam: It seems more than temporary right now based on the share price that we’ve seen, and based on traffic counts continuing to stay low, but this could have a really long term effect if they have another mishap on the scale of two, or three, or four, of those mishaps they had in a big clunk.
[00:11:16] Dan: Right. The thing about this too, let’s say they don’t have a mishap, but let’s say some disgruntled employee at a Chipotle in Farmington, New Mexico decides to take a picture of him doing something not very nice to the food-
[00:11:34] Adam: Which we’ve seen in some consulting work we’ve done.
[00:11:37] Dan: Right, we’ve seen it with so many brands because that’s the mentality that that worker can say, “Hey, I’m going to screw the man. This is a great way for me to do it.” Once again, there’s another example of you beat that drum too hard. The corporation only has so much control and then they have to lay down the trust all the way down the line to minimum wage workers. Man, I’ll tell you what, there’s, just again, I think we’ve made our point. There’s a lot of risk.
[00:12:13] Adam: And consumers only give you so much goodwill. There’s only so much trust and there’s a lot of hands out. There’s a lot of places I can go get a meal. There’s a lot of places, I can go to Qdoba. I can go to a lot of places and get a pretty good meal.
[00:12:26] Dan: Heck, I can go get a burrito at Safeway. What they’re serving isn’t unique selling proposition. How they were serving it, the value proposition of it and the quality of it, that’s what I was going for.
[00:12:42] Adam: Who knows the entire experience and knowing in the back of my mind that the production of it, and everything up and down the line. I was discussing this with some of our analysts earlier today and we were talking about the similar situation that happened in the ’90s with Jack in the Box. I think it was on-
[00:13:07] Dan: I was pretty young back then so don’t go around reminding me of that like that-
[00:13:11] Adam: [laughs] You know what, I lived in the east and we didn’t even have Jack in the Box when it happened, but they had an E. coli outbreak and I think it was on the — it might have been on the Freakonomics (editor’s note – this was actually episode 569 of This American Life) podcast just recently where they had the guys who rebranded them after that. What was really interesting about that was when they emerged from that — so they suffered, they had a bunch of E. coli outbreaks all at once, very similar situation. That was when they brought back Jack the character.
[00:13:39] Dan: They blew up the Jack in the Box.
[00:13:42] Adam: And they brought the character. They brought him back in this way and we’ll see if we can cut this in. He came back and the very first spot he comes into the boardroom, and there’s a board of people who are discussing like, “What are we going to do about this crisis?” And they don’t say E.coli and he says, “I’ve been gone for a while,” in his signature Jack in the Box voice that we all know and he says, “Well, I’ve been gone, you guys sent me out here, but I’m back and you owe me an apology.” He essentially, what the narrator in that show pointed out was Jack comes in and says, “The board owes me an apology, the customers owe me an apology, because I was cast out and now I’m back and I’m taking control.” And God bless them it worked because he was a exciting, interesting character that was new and unfamiliar, and that he didn’t say, “I assure you food safety is my number one priority.” He made a joke out of it, and made it fun and engaging in a way that made people just go, “Well, all right. It’s a cartoon Jack in the Box, I guess. Okay, how seriously can I take it? It’s okay.”
[00:14:46] Dan: But think about-
[00:14:47] Adam: We’re not gonna take it too seriously which is the opposite of what Chipotle is doing.
[00:14:51] Dan: That’s a great analogy. I think what was powerful about it is not only the message, but the character itself. Here’s this human being with this Jack in the Box hat-
[00:15:04] Adam: It’s ridiculous and I love it.
[00:15:05] Dan: Yes. It’s absurd, right? It showed things are different. Things are different without giving you the litany of, “We’re doing this, and then we’re going to do this, and we’re going to do this to make sure your food is safe.” Instead it’s like, “Hey, I’m back and you guys owe me an apology.” As a consumer, people are going to go, “Huh, I wonder what’s different?” It invokes that question of, “I wonder what’s different with Jack In The Box? I’m willing to take a risk for one visit to go see if it’s really — The advertising’s different, let me go see if the experience is different.”
[00:15:40] Adam: That’s such an awesome point. That brand has obviously thrived and has grown. Now, I live out west and we eat there. Before I probably wouldn’t have, but I see just from a visual standpoint, you’re right. What they were doing before versus here’s this new character, and he’s in your face and he’s aggressive, it tells me as a consumer, it’s a signal. Whether I hear anything of the message, it’s a signal that I get from a brand standpoint that, “Hey, we’ve turned everything upside down,” so therefore on a subconscious level I go, “I don’t know too much about this brand, E. coli. Everything’s different.” Now what Chipotle is doing, and what Dan and I, I think we agree, is wrong is they’re saying, “Hey, I know a lot about this brand, and I know food poisoning, and I know E. coli, and now they’re saying more talk about food safety and E. coli.”
[00:16:37] Dan: [laughs]
[00:16:38] Adam: Where their flaw is, right now would be the time for them to release that Scarecrow video.
[00:16:44] Dan: Yes, good point.
[00:16:45] Adam: They should be doing something totally different and showing Americans the shiny thing that makes them just say, “Oh, I guess I’ll –” They should do the golden wrapper again. They should bring back some of those programs. I know they did over the summer, the loyalty program which seemed to tick up traffic a little bit, but how do you feel about loyalty programs as a long term cure, especially the way they structured it where it was a monthly loyalty program, or a quarterly loyalty program.
[00:17:10] Dan: We all know that — hey, listen. Loyalty programs. You and I could debate this for a solid hour.
[00:17:15] Adam: Sounds like a future podcast for sure.
[00:17:17] Dan: Yes, it does, but the problem with a loyalty program — that’s a flawed name. Loyalty is not what that is. I want free sh*t-
[00:17:28] Adam: [laughs] Right.
[00:17:28] Dan: – that’s what that is. Because people like two kinds of things in the world, free sh*t and cheap sh*t.
[00:17:32] Adam: You’re right. [laughs]
[00:17:34] Dan: If you’re going to give it away to me, but that’s not — Am I really coming the four times to get fifth one free? If I’m coming four times to get the fifth one free, how loyal am I really?
[00:17:48] Adam: You’re really only coming for that free fifth one.
[00:17:50] Dan: Exactly.
[00:17:51] Adam: You’re not coming for those other four [unintelligible].
[00:17:54] Dan: By the way, if I’m eating out 20 times a month and I know that’s an exaggeration, but if I’m eating even a quarter-
[00:17:59] Adam: Not for lunch, you’re not including lunches.
[00:18:00] Dan: When we take lunch into a factor let’s just call it a quarter, you’re giving away a lot of product and there’s no guarantee that that’s really going to keep me. I’m not going, “Hey, I’ve got to go to Chipo–” Here’s what I’m trying to say. If the reason I’m going to Chipotle today is only so I can get a check on my loyalty program so I’m one step closer, I’m not loyal to the product, I’m loyal to free sh*t.
[00:18:29] Adam: Right. I’m loyal to a coupon, so you might as well just give me 20% off.
[00:18:33] Dan: Exactly.
[00:18:34] Adam: You might as well just cut your margins by 20%. As a shareholder, which I’m not, if I was looking at traffic over the past Q3 when they launched that thing, that would be my question, is, “Okay, what’s the traffic counts? How much did that rise? Then, therefore how many people were involved in that loyalty program and how much can I lie in those things, and somebody better have that answer.” If one led the other, I’m out, I’m selling. Let’s get the hell out of here, this is broken.
[00:19:02] Dan: Now, correct me if I’m wrong. McDonald’s?
[00:19:05] Adam: No loyalty program.
[00:19:06] Dan: Burger King?
[00:19:08] Adam: No loyalty program, but they-
[00:19:09] Dan: No loyalty? [laughs]
[00:19:10] Adam: Yes, that would be a brand that I would say maybe they need it.
[00:19:13] Dan: I think if we look at some powerhouse brands though and ask the question-
[00:19:18] Adam: Point taken.
[00:19:18] Dan: – are they doing loyalty? Frequency, a visit, is the holy grail for a restaurant. The 1.5, the 1.7. You get that frequency up and I think if loyalty programs were that effective, I think you’d probably see some star brands like McDonald’s all over that.
[00:19:38] Adam: Yes, and just to close on Chipotle, I guess, we talk about brand strategy but that’s not really our sole focus here. I guess the other thing I would think as a shareholder, I want to get traffic stabilized. I don’t want it down. It doesn’t have to rise meteorically if I can add some up-sale items. One thing Chipotle, in my opinion, has been lacking, and failing, and had they not had a outbreak of food poisoning people would probably be jumping through their computers and strangling me for saying anything negative about them, but they’ve never added those snack items or those up-sale items that — Dan just mentioned McDonalds and Burger King, and what they’re experts in is getting another $1.39 out of me. If I bring my kids and I-
[00:20:22] Dan: Or even the $0.59 in an ice cream cone, right?
[00:20:25] Adam: They find a way to get another $1, or $0.60, or $2 out of me every time and Chipotle really, in their quest for the higher ground, has failed to do that. They’ve added tacos — that was a long time ago, I wouldn’t say they added them. They have tacos on the menu, but they never added any of those ancillary items until they said, “Whoa, we’re going to do hamburgers, better burgers.” Well, you know what? That’s a replacement for your product, and this is a hell of a time for me to come in and try something new at a place where I’m concerned about the safety of the food.
[00:20:56] Dan: Well, in God’s sakes, do we need another burger option?
[00:21:00] Adam: Jeez, no.
[00:21:01] Dan: At this point in time. Yes, it’s interesting.
[00:21:05] Adam: What do you think about their chances of that burger succeeding? We’re on a tangent now, this has nothing to do with their messaging.
[00:21:12] Dan: I got to tell you, I would be terribly shocked if we found out that the burger was actually driving traffic, A. B, getting sales. I agree with you a 110%. I am now going there because my buddy wanted a — Adam and I want to go to lunch, Adam says, “I want to go to Chipotle.”
[00:21:36] Adam: [laughs] I know exactly where you’re going.
[00:21:36] Dan: Because he says he wants a burrito-
[00:21:41] Dan: – and I’m like, “Oh, hey, I can get a burger there because I don’t want to a –” and maybe that’s a good thing because that got us to visit, but I’ll tell you, I think it’s an erosion strategy not a growth strategy.
[00:21:53] Adam: Yes. The only thing I would say about the burger is that the burger, again, if we say they should have done something like the Scarecrow, to take a left turn on messaging then the burger makes absolute sense because it’s just, “Hey, there’s something shiny over here. We’re doing something totally different.” Then I say, “Well, okay let me think about –” That’s a different thing than what I was just thinking about based on the news. Maybe that’s what they were going for.
[00:22:17] Dan: I don’t know. There’s this product down in Tucson. I don’t know if you’ve ever had it, I’ve never had it. I’ve heard about it it’s like these Mexican hot dogs.
[00:22:26] Adam: Oh, yes.
[00:22:27] Dan: There’s a name for them.
[00:22:28] Adam: They’re delicious.
[00:22:29] Dan: Yes, they’re supposedly fabulous.
[00:22:31] Adam: You got this, I know it.
[00:22:32] Dan: That would be fantastic, because now it aligns with the brand, the Mexican food brand.
[00:22:38] Adam: The hotdogs are on trend.
[00:22:39] Dan: Yes. Come on that’s so — and by the way, Chipotle, you can have that one for free. If I see it on the menu I will wait.
[00:22:46] Adam: Actually we would take a consulting fee for that one.
[00:22:48] Dan: Yes.
[00:22:49] Adam: But yes, that would actually be a logical thing that goes in with Mexican grill and ties in, although they don’t honor the Mexican nature of their cuisine, but I get it. At least it’s not a what? [unintelligible].
[00:23:01] Dan: Right. Hamburger, American.
[00:23:03] Adam: It doesn’t make any sense.
[00:23:05] Dan: It doesn’t get any — there’s a clear juxtaposition.
[00:23:08] Adam: Well, we’ll be watching next quarter to see what their reports say and to see if the test doors are bearing out any sales of that.
[00:23:16] Dan: One of these days what we ought to do in one of our podcasts is that you ought to short a stock and I’ll buy a stock that’s in play like Chipotle-
[00:23:24] Adam: Dan.
[00:23:25] Dan: – and-
[00:23:26] Adam: Dan.
[00:23:27] Dan: – let’s see who the winner is.
[00:23:28]Adam: I would have loved to have done that with — I was just reading some old writing that I did about McDonalds and millennials. I had said millennials hate McDonalds and it’s not coming back, and now it’s coming back. I don’t know if it’s all millennials, but definitely I was wrong about the stock price.
[00:23:44 ] Dan: You would have been wise to have shorted it back then, but you just got to make sure you got out of this.
[00:23:49] Adam: I hit, I got a hit.
[00:23:51] Dan: Yes, Joe, I like it.
Adam: All right. This has been an exhilarating conversation. I think that does it for this episode. If you are listening and you have questions or thoughts, you disagree with us, you agree with us which is also okay, please feel free on Twitter, we are @FandRM, or on our website Food and Restaurant Marketing. You can drop us a comment on this and we’ll add a comment box to this episode. Please rate us on iTunes or share this episode with your friends. We really appreciate. Thank you.
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