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Chipotle handed out around 3.5 million free burritos to prove their food was safe amid health concerns and to make its restaurants less “eerie” to customers, the chain’s executives said Wednesday.
After outbreaks of norovirus, salmonella, and E.coli at Chipotle locations all around the country last year, sales tanked and the company closed all locations on February 8th to have an all-employee safety meeting.
The revamped safety guidelines were accompanied by an ongoing massive marketing push centered around sending out coupons for free burritos. Mark Crumpacker, Chipotle’s chief creative officer, said at a Bank of America Merrill Lynch conference that the company had expected the promotion to “go viral” and that 2.5 million would redeem the coupons.
Over about five hours, he said, 5.3 million people requested coupons, and about two thirds of them actually used them — “an extraordinarily high number.” Crumpacker said that Chipotle was planning on sending out 21 million pieces of direct mail, and that between six and 10 million had already been sent out.
Hartung said that another benefit of the coupons was that it made Chipotle locations — many of which were nearly empty before the Center for Disease Control declared the E.coli outbreak — feel less “eerie.”
“We also wanted to show that this is what Chipotle looks like and it was kind of eerie, and we’ve heard this from customers, they would walk by our restaurant and see, God that was always busy and now there is no line whatsover, that’s not the case anymore,” Hartung said.
Chipotle’s sales are still falling this month, but are starting to climb back this year overall after plunging 40% in January, the company’s co-chief executive officer, Steve Ells, added at the conference.
Ells’s comments came after Chipotle announced on Tuesday that it was anticipating its first quarterly loss ever as a public company — and that its comparable sales in February had declined 26%.
Comparable sales reached their low in the middle of January, falling about 40% on an annual basis in the middle of the month. Ells said now they got back up to negative 20% at the beginning of March before dipping again after a suburban Boston location closed after employees called in sick on March 8.
“Our teams did an awesome job, they followed the protocol fully. And as a result, they protected our customers and no customers were affected. So, this was a really good thing,” he said.
Chipotle put a brave face on what otherwise looks like sobering data, saying in a presentation that a “comparable sales recovery [is] underway.” After the Boston area closing, Chipotle chief financial officer Jack Hartung said, “our comps declined..to about (negative) 27%.”
Chipotle Mexican Grill / Via file:///Users/matthewzeitlin/Downloads/Chipotle_BAML_Final.pdf
But since Chipotle previewed its quarterly earnings and reported its monthly sales, the company’s stock is still down slightly and has fallen over 26% in the last year.
“Our earnings and margins are not going to be very impressive in the short term,” Hartung said, pointing not only to the poor consumer perception of the chain, but also supply chain issues introduced by the burrito coupons that led to more food waste, along with higher marketing and legal costs spurred by a Department of Justice investigation into its food safety practices. Ells said that the company has gotten closer to identifying the source of the E.coli outbreak.
“We have many more fresh ingredients in the typical fast-food restaurants. And so, there are potentially a lot of sources for such an incident,” Ells said. “We have been looking with the CDC, with our epidemiologist, with food safety experts, with local health departments and nobody initially could identify what the source was. We think we have a pretty good idea, but not definitively are we going to say what it was.”
Ells said the changes, despite being costly and time-intensive, have been good not just for the safety of the food, but for how it tastes. “Every single ingredient now that we bring in has been scrutinized, every single cooking technique has been scrutinized and we’ve made a number of changes and a lot of these changes also have been for the better, I mean the food actually tastes better.”