TORONTO – There’s one number of customers who don’t seem all that bothered by a number of outbreaks at Chipotle Mexican Grill: teenagers and college-aged youth.
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That could signal an area of expect a business whose fresh-prepped Mexican fast-food dishes took the industry by storm before being rocked with a food poisoning scandal this fall and winter. Countless customers fell ill, with installments of both E. coli and Norovirus reported, and also the outbreaks led to a 44 per cent plunge within the restaurant chain’s fourth-quarter profit, reported .
Chipotle reported earnings of US$67.9 million within the three-month period ended Dec. 31, or US$2.17 per share, compared with profit of US$121.Two million (US$3.84 a share) within the same period last year.
The numbers beat the business’s own projections from last month, if this said it expected to report fourth-quarter earnings per share of between US$1.70 and US$1.90. Same-restaurant sales, an important retail metric that strips out sales growth from new restaurants, plunged 14.6 per cent and revenue fell 6.8 percent, to US$997.5 million.
But data from market research firm NPD published in advance of Chipotle’s bruising results Tuesday provides a glimmer of optimism for that company.
NPD discovered that total customer visits to the fast-casual restaurant chain fell five per cent in the three-month period ending Dec. 31, compared with a traffic gain of 19 per cent within the same quarter last year.
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But the research firm reported customers aged 13 to 24 increased their visits by more than 10 % year-over-year throughout the headline-grabbing period between October and December, despite the fact that outbreaks of E. coli linked to Chipotle were reported in 11 U.S. states, along with a Norovirus that swept through Boston was associated with a Chipotle restaurant.
“That loyal cohort was either unaware, didn’t care or were attracted by some from the discounting that Chipotle quickly gone to live in in order to bring customers in that age bracket,” says Robert Carter, executive director at NPD in Toronto.
“It’s difficult to think that there’d be considered a lack of knowledge, but either they just didn’t think they were getting sick or didn’t believe it was as widespread and dangerous because it was. To really see a rise in traffic in that period, the brand loyalty should be incredible – that’s like Tim Hortons’ brand loyalty (in Canada).”
Teenagers and teenagers aged 13 to 24 account for more than a third of Chipotle’s traffic volume in the U.S., roughly 35 per cent, according to NPD, and visits from that demographic climbed 11 percent in 2015, the study firm said.
In Canada, Chipotle is a much newer brand with so few units it does not register on NPD’s restaurant tracking.
The challenge Chipotle faces now’s to recuperate newer or infrequent customers, who might otherwise visit a full-service restaurant or to McDonald’s, that has begun offering some customized burgers and all-day breakfast to be able to contend with fast-casual rivals.
Carter believes Chipotle will have to perform a sustained marketing and advertising campaign to underline heightened food safety precautions whether it includes a hope of bringing infrequent customers back to the chain.
“They will even likely have some price incentives to obtain individuals to try it,” Carter added. He believes it might take about six months for the chain to recuperate. Chipotle’s share price has tumbled 37 percent previously three months. They rose just slightly on Tuesday, closing up 0.7 per cent at US$476.
The negative PR in the U.S. poisonings has probably hurt the brand’s image in Canada too, Carter said, but he imagines a good messaging effort could help restore the budding brand’s image.
Chipotle has implemented a variety of new food-safety measures to detect contaminants, including sophisticated ingredient testing and extra training for restaurant employees.
The company has also hired food service experts, conducted scientific tests at its restaurants and replaced food, that will cost approximately at US$14 million to US$16 million within the fourth quarter.
On Monday, the U.S. Cdc and Prevention reported that the two E. coli outbreaks associated with Chipotle “appear to be over,” most abundant in recent related illness reported to the CDC at the begining of December.
Hshaw@nationalpost.com
Twitter.com/HollieKShaw
