Chipotle Company Analysis - Essay Example

Chipotle Company Analysis In every competitive market situation, business firms have to device strategic methods of operatingto achieve their utmost goal, which is making and maximizing profits. The success of a company in terms of attaining its predetermined goals depends on various factors. The responses of buyers to the firm’s products or services together with the branding and marketing strategies are some notable factors that may influence the success a business. One company that considered changing its marketing strategies and rebranding its products is Chipotle Mexican Grill (CMG). It did so to improve its profitability. The essay entails an assessment of the effectiveness of the unique rebranding and marketing strategy developed and adopted by CMG. Chipotle Mexican Grill (CMG) is a chain of restaurants with its major operations in U.S.A Canada, Germany, U.K., and France. The company falls under the Indices S& P 500 Retail-Eating Places industry. It is listed on the New York Stock Exchange Market and supplies a variety of unique foods. The company was started by one Steve Ells back in 1998 in Colorado, with only 16 restaurants (Chipotle Mexican Grill 2015). Chipotle became an entity in 2006 when McDonald Company considered divesting its operations, due to increased investments. Today, the company has more than 1600 location internationally. Its annual net income is more than US $300 million. The company total employs more than 45,000 people today (Chipotle Mexican Grill 2015). The main menu offered by the company comprises burritos, tacos, burrito bowls, and salads. The pricing of these foods depends on the type of ingredients mix used for each. Some of the ingredients are pork carnitas, chicken, barbacoa, steak, and vegetables. These foods are made of raw, fresh and healthy ingredients that are obtained through classic cooking techniques. They are usually dished up in unique environments. The company’s vision focuses on providing Food with Integrity. Chipotle is looking forward to providing healthier foods from various fresh ingredients, including ingredients that are grown naturally. To make such foods, the company takes caution while making selections from the animals, land, and the farmers. Nearly all the meat foods supplied by Chipotle restaurants are raised naturally. According to Chipotle Mexican Grill (2015), they are described as “coming from animals that are never given antibiotics or added hormones and that are raised responsibly.” Chipotle founder CEO, Steve Ells, once said, "When I created Chipotle in 1993, I had a very simple idea: Offer a simple menu of great food prepared fresh each day, using many of the same cooking techniques as gourmet restaurants. Then serve the food quickly, in a cool atmosphere. It was food that I wanted and thought others would like too. Weve never strayed from that original idea. The critics raved and customers began lining up at my tiny burrito joint. Since then, weve opened a few more." The company positions itself in a unique way in terms of consumer needs, environment trends, and social-cultural situations. Since it became an entity after McDonald divested in 2006, Chipotles Company has resorted to a unique operational strategy to survive. The uniqueness lies in its pricing and production. The company has constantly and consistently considered increasing its food prices, despite the lower prices of its major competitors. The price of meat has not dropped considerably recently, and this could be the main reason for Chipotle’s decision to keep increasing its food prices. The management decided to remain objective and consistent with the company’s vision, of providing ‘food with integrity.’ There are many supply constraints in the market currently, which imply that the price of meat will keep rising in 2015 and 2016 (Chipotle Mexican Grill 2015). The company has this as a factor for increasing their food prices. As expected, this has made the company lose a number of its customers who resorted to buying from its competitors. Despite the loss of a considerable customers’ base, Chipotles registered an 8.5% rise in its earnings. The increase was recorded in the third quarter of the financial year 2009. Some analysts argue that by remaining adamant to its high prices; Chipotles is losing out on its profits. They say the company will also experience a shortage in the supply of pork since the suppliers will no longer meet the welfare set by the company. True to their word Chipotles has registered a mixture of results lately. Its sales dropped drastically, and it faced a shortage of ingredients due to supply constraints. The supply of pork, carnitas and avocados reduced some time greatly. The company also had its profits reduce at some point due to the fall in sales. Its stocks also fell by 7% in the third quarter. Despite getting all these losses as advised by analysts, Chipotles’ management remains optimistic that the company will still attain its business goals. They remain strict and loyal to their quality yet expensive health and integrity standards (ambitions). The company is not willing to compromise its quality and business ethics for merely short-term benefits. As a matter of fact, their commitment to the company’s objectives, goal and vision has started to pay off. People seem to be moved by their quality foodstuffs and the prices for its shares have increased to $680 (Chipotle Mexican Grill 2015). The management team has robust faith in sustainable growth and development hence their focus on long-term profitability of the company. Since its conception, Chipotle mainly utilized billboards, radio ads, and verbal methods for advertisements. Recently in 2012, Chipotle started commercial advertisement strategies by airing its first television advert nationally. The advertising activities have been intensified through improvement of the advert content to match those of their competitors. Chipotle Mexican Grill (2015) reveals that in 2010, a unique advertisement strategy involving an ad-campaign that mocked the pieces of advice offered by other advertisement agencies. Chipotle did various promotions where it issued free foods to potential clients during the launch of its newest stores. Free burritos are also given freely on specific occasions. On specific holidays, the company gives free burritos to those customers, who are clad in burrito fittings During the Halloween holiday celebrations of 2010, Chipotle made an announcement that it would sell each burrito for only $2 to all clients who were dressed like a processed food product. The initiative was meant to help fundraise $1 million for the popular ‘Jamie Oliver’s Food Revolution’ popularly referred to as ‘Burrito 2010.’ The strategy of issuing free foods to customers was first tried by Chipotle in Denver in 1997, during the trial of Timothy McVeigh. On this occasion, the food was given for free to reporters. Chipotle Company has also invested in providing support services to victims of natural catastrophes inform of foodstuffs and cash. A real example is when the company decided to give free foodstuffs (burritos) to the victims of Hurricane Katrina (Chipotle Mexican Grill 2015). The company has also resorted to releasing music videos of one Karen O, of the Yea Yeah Yeahs and Willie Nelson. It is true that in 2013, the company released a video called ‘The Scarecrow’ together with a mobile video game. The two entailed a tale that sharply criticized all manners of industrial farming. It was later discredited, however, for lacking a sense of direct marketing for the company. In 2012, the ‘Farm Team’ was formed by the company. It is a program for making rewards to customers and clients through invitation by the restaurant’s management only. The members of the Farm Team can access a special website of Chipotle corporation through which they can get rewards. Such rewards include T-shirts and free foodstuffs. Through this site, members can know where the foods of Chipotle foods originate. They participate in quizzes, take polls, play and watch the company’s videos (Chipotle Mexican Grill 2015). Chipotle has since participated actively in several community support and donation activities. The overall purpose behind the implementation of these marketing and promotional activities is to improve the company’s visibility to the potential buyers. The foods (fast foods) industry is dominated by many other established corporations that use sophisticated marketing strategies; there is very stiff competition. Each food processing firm strives to attain a significant market share prompting the application of unique marketing methods by each firm. The rationale is to have a consistent group of customers with a strong sense of brand loyalty for the company’s products and services. The whole process is achieved by attracting and persuading the potential customers to buying the company’s products. Chipotle decided to venture into intense promotional activities like the issuing of free food-stuffs and discounts for their products to create a good relationship and enhance their contact with their customers (Chipotle Mexican Grill 2015). The donations and financial support granted to the victims of natural disasters and charitable causes was aimed at creating a strong brand image. It would in effect increase the company’s visibility, as well as wider customer base. With the assurance of a significant customer base, the company will in effect register an increase in its total sales. An increase in the company’s total sales would imply higher total sales revenues, and this has a positive impact on the company’s profitability. Chipotle’s marketing department expects that the intense commercial marketing and product rebranding strategies will help improve the company’s profitability. Chipotle Company’s income statement reveals that the company registered the following financial results; In conclusion, Chipotle Mexican Grill has adopted a unique business strategy as it strives to attain its predetermined goals. The company is considering high pricing for its products despite the short term cot of loss involved. Instead, the management team prefers to remain committed to the company’s vision by supplying high quality food of integrity. The company has also chosen unique marketing strategies in attempts to increase its visibility worldwide. The company, which deals in processed meat foods that are made from natural ingredients, has embarked on intense promotional activities that are aimed at building a strong brand loyalty to the potential customers and to build better relations with its clients. The unique set of promotion and marketing strategies has all led to an improvement in the company’s profitability, as revealed by the company’s favorable ratios and profit figures in its 2014 financial report. The strategy is, therefore, a great success. Reference Chipotle Mexican Grill (CMG). (2015). Company Information. Retrieved from http://www.barchart.com/profile/stocks/CMG Read More