For the last few years, good days have been hard to come by for Chipotle, once hailed as the standard-bearer in fast casual. But Wednesday, following the announcement that Taco Bell CEO Brian Niccol would be assuming that role at Chipotle, was its best since October 2013. The burrito chain’s shares leaped more than 15 percent on Valentine’s Day, soaring as high as $292.30.
Niccol has fronted a strong resurgence at Taco Bell since 2011. He worked to bring odd and intriguing menu items to the YUM! Brands chain, such as Doritos Locos Tacos, breakfast tacos with a shell made from fried eggs, another taco with a fried chicken “shell,” and, most recently, French fries served with a side of nacho cheese.
As noteworthy as the food items are, the marketing campaigns around them have been just as profound. One recent example: the Josh Duhamel-led faux movie trailer depicting some threatening clowns trying to keep the new menu item under wraps. From a Wall Street perspective, YUM shares have more than doubled since Niccol took over at Taco Bell.
Investors took notice of Chipotle’s blockbuster hire. With Niccol’s appointment, market analysts expect more menu innovations from Chipotle, a restaurant that’s notorious for its reluctance to change its rigid food structure. Of course, Niccol didn’t jump ship to bring Doritos Locos Queso to Chipotle. But the hire is a clear attempt to correct the course at Chipotle and infuse some optimism and possibility into the brand, which has slogged for years after repeated food-safety scares trailed its 2015 E. coli crisis—warranted or not.
While the market rallied behind the news, the brand has a long road to recovery. One share of Chipotle was worth $758.61 on August 5, 2015. And just last May, Chipotle stock reached a 52-week high of $477.35. But the surge is certainly a ray of light in what has been a frustratingly long tunnel for the brand. Currently, shares are worth about 60 percent of Chipotle’s all-time high.
While founder and outgoing CEO Steve Ells catapulted Chipotle to lofty stature, booming to nearly 2,500 locations, the chain’s inability to escape its food-safety concern shadow proved too unwieldy. In the past year alone, Wall Street reacted harshly to a norovirus outbreak in Sterling, Virginia, and another possible scare in Los Angeles. Whether these were overreactions or proper ones is another story altogether. Yet the fluctuations showed how ragged the cracks in Chipotle’s armor had become.
However, flipping adversity is precisely Niccol’s specialty. While Ells originally came from the kitchen, Niccol is straight out of the boardroom. He rose through the ranks at P&G for a decade before undertaking revitalization efforts at Pizza Hut and Taco Bell, the latter being his breakthrough success story. Compared to the more than 7,000 Taco Bell locations Niccol managed, Chipotle’s size won’t be an issue.
The real question is whether or not Chipotle can convince its customers to trust again. Within the last five years, the brand went from cultural phenomena to pariah in the blink of an eye. Check out this data from UBS Evidence Lab as proof. Basically, looking at more than 230,000 Chipotle reviews over the last few years, the customer sentiment arrow has moved in the wrong direction, steadily, without any real sign of shifting gears.
But if anyone is up for the task, it’s Niccol, who, through outside-the-box menu innovations and marketing campaigns, convinced plenty to Live Mas with the Taco Bell lifestyle.
For Chipotle, Niccol might not be the solution to all its problems. But the hire, at least according to investors, is a surefire step in the right direction.
Jacob Urban, in an article on stock market insights platform Seeking Alpha, placed a “buy” rating on the stock for a straightforward reason: Niccol’s skill set aligns with the challenges facing Chipotle today.
“While Chipotle was failing to master a concept as seemingly simple as queso, Taco Bell launched successful new products and marketed them with brilliant advertising. Analyzing both of Chipotle's major shortcomings in light of the new hire reveals precisely why Niccol can be the long-absent force that unlocks value for Chipotle shareholders,” Urban wrote.
In addition to the queso conundrum, which resulted in Chipotle reworking the recipe, the brand cut Chorizo off its menu in September and decided not to move forward with Bunuelos, which would have been its first dessert. According to the brand, the item didn’t perform as well as hoped in tests.
While Niccol is not a chef like Ells, who graduated from The Culinary Institute of America in 1990, he has proven to be a marketing maven when it comes to new menu items. He earned AdAge’s Marketer of the Year award in 2013 and has driven Taco Bell forward with a deft touch. The brand is offbeat and understands its fanbase, even spearheading a Forever 21 fashion line for guests.
Naturally, the message at Chipotle—“Food with Integrity”—is a far different ballgame than Taco Bell’s edgy façade. Urban believes Niccol won’t have a problem championing Chipotle’s strengths. “… Niccol demonstrated a propensity to find what resonates with customers at Taco Bell; if 'Food With Integrity' works, we can expect this message to be shouted all over social media channels in the Niccol era,” he wrote.
Taco Bell and Chipotle will unquestionably be much different operations. If nothing else, Taco Bell’s heavy franchised structure under YUM makes it a far different task for Niccol out of the gate. There’s no denying, though, Niccol has shown a knack for identifying and tapping into a concept’s link with guests. Can he reroute this relationship and return it to past success? Only time will tell, but, for now at least, the light is green once again.
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