The fast food chain, which has deployed rewards program and free food in months after E coli outbreak, reported second quarter sales 23.6% lower than last year
Five months and millions of free burritos into its sales recovery plans, Chipotle is still struggling to lure back its once-loyal customers. On Thursday, the Mexican food chain reported that its sales for the second quarter came in at 23.6% lower than they did a year ago.
Last quarter, as Chipotle began its recovery, it posted its first quarterly loss since going public. Chipotles troubles all started in October of last year, when an E coli outbreak and a series of norovirus cases scared off its loyal customer base.
This quarter, Chipotle posted a net loss of $0.8m for the six months ending in June. Last year, during that same period, the company posted a net income of $262.8m.
We returned to profitability, Steve Ells, founder, chairman and co-chief executive officer, pointed out. On a call with investors, Ells noted that he wished for the sales recovery to move at quicker pace. During the second quarter, he said, it continued at a modest pace.
The company is making more efforts to win back its customers including the addition of chorizo to its menu and a new rewards program through which customers can earn free chips and burritos.
The first phase of the sales recovery plan was launched back in February, when Chipotle closed all of its stores for a company-wide meeting on food safety. After the meeting, its staff gave out coupons for free meals. As part of those efforts, Chipotle gave out more than 6m free burritos and 1m free orders of chips and guacamole.
At the beginning of July, just as the third quarter began, Chipotle announced a new rewards program, Chiptopia. The program is temporary and is scheduled to end in September. The company hopes that by rewarding customers for coming in more frequently with burritos and free chips, it will facilitate restoring of their trust. Especially, since most of its loyal customers who used to come three to four times a week prior to last October, now only come once or twice.
According to Ells, 30% of all transaction were part of Chiptopia and the store traffic numbers for July were improving.
Chipotles officers view every visit as an opportunity to further restore trust. Chiptopia has 3.6 million participants so far. Results from the current program will be analyzed in order to devise another rewards program, which the company said will be introduced after Chiptopia ends in September. It has not yet been decided whether that program will be temporary or not.
The company said that Chiptopia and A Love Story, a short film released by Chipotle, were part of the strategy to create new news that would allow the company to reclaim the its voice and introduce Chipotle to new customers.
Unfortunately for Chipotle, the same day that it added chorizo to its menus in select cities and rolled out Chiptopia, its chief creative and development officer Mark Crumpacker was indicted for allegedly purchasing drugs. His arrest was part of a cocaine delivery service bust in New York.
Crumpacker, who joined Chipotle in 2009 and was one of the executives leading the marketing efforts to restore the companys image, has since been placed on leave.
Ells noted that the company was surprised to learn of Crumpackers personal issues. Chipotle has the utmost confidence in the teams he has established, Ells said.
Read more: https://www.theguardian.com/business/2016/jul/21/chipotle-quarterly-sales-free-burritos-e-coli
