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Chipotle brand audit paper [final copy]

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  • 1. BRAND AUDIT Qijiao Fan Hai Nguyen Weizhi Feng Adrian Torres
  • 2. Part I: Brand Inventory – Company View History and Corporate vision Inspired by authentic ingredients and the economic model of one local taqueriastore in San-Francisco, Steve Ells began to open the first Chipotle store in 1993 at aformer Dolly Madison ice cream location near University of Denver campus. The firstChipotle was a wide success. After two years since the first Chipotle opened, Steveadded the second and third Chipotle locations. In 1996, Chipotle Denver area restaurantopened. Following the extraordinary successes, Chipotle was able to invite moreoutside investors to expand the scale of production to give way for the Chipotle’sopenings outside of Colorado: Minneapolis, MN, Columbus and OH. After Steve visitedsome individual local farms, he found out pigs were raised in air-opening area asopposed to the way majority of pigs were raised. So he decided to dg pork and chickennaturally. Chipotle went public on New York Exchange in 2006. After that, Chipotle still keptfocusing on providing the most authentic and healthy ingredients within each burrito. Hisvision is to serve 100% naturally raised beef in the near future. Moreover, Stevepromoted to eliminate the antibiotics in ranching. From the year Chipotle opened untilnow, it has always been emphasizing on pursuing high-quality ingredients and cooking
  • 3. techniques to provide best eating experience for customers and fulfilling corporatesocial responsibilities. Driven by its main vision “Food with Integrity” -which is to serve the food madewith ingredients that serve the best for animals, environments and farmers, Chipotle isstill following it and making progress year by year. By 2010, 75 million pounds of meat isnaturally raised in a human way without given any antibiotics or added hormones.Besides naturally raised animals and providing fresh meat, we expect to increase thepercentage of our cheese and sour cream made with milk from pasture-raised cows. Wewill continue following our vision and improve our business performances bystrengthening our economic models and expanding restaurant margins. Menu and Food Preparation Chipotle serves only a five things: burritos, burrito bowls, tacos and salads. Butbecause customers can choose from four different meats, two types of beans and avariety of extras such as salsas, guacamole, cheese and lettuce, there’s enough varietyto extend its menu to provide countless choices. Chipotle said that it plans to keep asimple menu, but it will consider additions that it thinks make sense. Chipotle alsoencourages customers to let it know if they can’t find something on the menu that’squite what they want; and if they can make it from the ingredients they have, they’ll do
  • 4. it. In addition, Chipotle started to offer Kid’s Menu in 2009 to attract more families totheir restaurants. Food With Integrity: Chipotle wants to keep a simple menu so that they canconcentrate on where they obtain each ingredient, and this has become an integral partin their effort of providing high quality food. For example, as of December 31, 2010, allof Chipotle’s restaurants served carnitas made with naturally raised pork, as well asbarbacoa made with naturally raised beef. Also as of December 31, 2010, about 80% ofChipotle restaurants served naturally raised steak and about 86% of our restaurantsserved naturally raised chicken. Naturally raised meat is defined by Chipotle as themeat coming from animals that are fed a pure vegetarian diet, never given antibiotics orhormones, and raised humanely. Chipotle said that its definition is stricter than the U.S.Department of Agriculture’s standard for naturally raised marketing claims. “In preparing our food, we use stoves and grills, pots and pans, cutting knives,wire whisks and other kitchen utensils, walk-in refrigerators stocked with a variety offresh ingredients, herbs and spices and dry goods such as rice. Ingredients we useinclude chicken and steak that is marinated and grilled in our restaurants, carnitas(seasoned and braised pork), barbacoa (spicy shredded beef) and pinto and vegetarianblack beans. We add our rice, which is tossed with lime juice and freshly choppedcilantro, as well as freshly shredded cheese, sour cream, lettuce, peppers and onions,depending on each customer’s request. We use various herbs, spices and seasonings
  • 5. to prepare our meats and vegetables. We also provide a variety of extras such asguacamole, salsas and tortilla chips seasoned with fresh lime and kosher salt. Inaddition to sodas, fruit drinks and organic milk, most of our restaurants also offer aselection of beer and margaritas. Our food is prepared from scratch, with the majorityprepared in our restaurants while some is prepared with the same fresh ingredients incommissaries. Marketing Mix Product Chipotle is best known for its large burritos, which are wrapped in foil paper andserved hot. They are made by flour tortilla with rice, black beans, meat, salsa andcheese inside. Beside burritos, Chipotle also served other food including burrito bowl,crispy and soft tacos, and salads, with a choice of chicken, pork carnitas, barbacoa,steak, or vegetarian. Price Chipotle distinguishes itself from its premium pricing strategy. Comparing withtheir competitors in a broader sense, such as McDonald’s or Subway, Chipotle pricedtheir food higher. The price starts around $5.95 for a Chicken Burrito and can reach ashigh as $8.15 for a Steak burrito with Guacamole. Prices of burritos depend only on thetypes of meat. Customers can add all kinds of beans, rice, and salsas with no extra
  • 6. charge. The brand image is enhanced by a relatively higher price than other fast foodrestaurants. Promotion Chipotle has run many promotions giving out free food to potential customers,especially when opening a new store. Stores also give out free burritos on certainoccasions; for example, Chipotle gave away free burritos to reporters during the 1997trial of Timothy McVeigh, which took place in Chipotles hometown of Denver, and so didthey to those displaced by Hurricane Katrina in 2006. For Halloween 2010, Chipotle announced that customers who dressed as aprocessed food product would receive a burrito for $2. The event was part of a $1million fundraiser for Jamie Olivers Food Revolution called “Boorito 2010: The Horrorsof Processed Food." The promotion isaimed to increase awareness offamily farms. Also in support of familyfarms, Chipotle released music videosof Karen O of the Yeah Yeah Yeahsand Willie Nelson.
  • 7. Locations Since its first restaurant opened in 1993 in Denver, Colorado, Chipotle has been putting effort in distribution throughout the years. Today, the company has more than 1200 locations, with restaurants in 41 states, Washington D.C., Toronto, and London, making it very convenient for customers to buy their food anywhere they go. Chipotleoffers various ways to distribute their food. Even though most customers order food instore, they can also order it online or use the ordering application on an iPhone, or evenjust send the order to the Chipotle store that is closest to the customers through fax.There is also an ordering method available for events from which customers can orderburritos by box. In Austin, TX, Chipotlerecently started a new distributionchannel by sending out a truck with allthe cooking facilities inside. Thisdistribution form is a copy from Mexicowhere such vendor trucks are common.Followed by an irregular schedule released on Twitter, the truck goes to sell Chipotle in
  • 8. different places of the city. The Chipotle truck serves almost the entire in-restaurantmenu except chips and crispy taco shells and the same ordering process. Communications and Marketing Activities The company has put a lot of efforts in communicating with customers throughdifferent platforms. For example, on the website page of Chipotle there is a sectionnamed Fan-Antics, where Chipotle’s fans can leave a message or submit their picturesthat can be displaced on the website. Meanwhile, on their Facebook page there arepeople posting on the wall nearly every minute and most of them get replied from theChipotle immediately. Meanwhile Chipotle has been actively engaging with the local communities.Chipotle thinks that “Each and every Chipotle restaurant is an active part of theneighborhood around it- because without a neighborhood, you couldn’t have aneighborhood burrito joint.” So far Chipotle has been hosting and participating in a greatnumber of social events. These events, ranging from high school basketball team dinnerto workshop of educating people about their core value “food with integrity”, have allbeen helping to increase the brand awareness of Chipotle. In the past, Chipotle mainly relied on billboards, radio ads, and word-of-mouth toadvertise. However, in 2012, Chipotle aired its first nationally televised commercialduring the 54th Grammy Awards ceremony. Chipotle received attention when Ozzy
  • 9. Osbourne’s reality shows The Osbournes featured the companys burritos heavily.Chipotle was also mentioned throughout the "Dead Celebrities" episode of the televisionseries South Park. Event Sponsorship & Community Building 3rd Annual Haley Pontiac- Chipotle Bryan Circuit Race Location: Richmond, VA Date: May 2009 ! Burritos on wheels? We got to sponsor a circuit race in Richmond with over 250 local cyclists participating. Burritos and chips and salsa were passed out to fuel the riders. Primes(pronounced "preem”-- which is your French lesson for the day) are awardsgiven for riders who reach milestones during a sprint, and in this ride theprimes were burrito bucks. It was exciting to see the riders put the pedal downwhen they knew a burrito was on the line!Catch 25 Foundation FundraiserLocation: New York CityDate: December 2009 We were pretty excited to work with theYankees World Series Champion Manager Joe
  • 10. Girardis Catch 25 Foundation (which is dedicated to supporting individuals andfamilies around the country suffering from ALS, Alzheimers, cancer and fertilityissues.) The West 45th Street Chipotle held a fundraiser that raised over $5100! Brand Attributes Throughout the years, Chipotle has always focused on more than just providingfresh, organic burritos made with high quality raw ingredients. We focus more on thesource of ingredients and keep finding the ingredients raised with the respect for theanimals, the environment and farmers guided by our “Food with Integrity” vision. Inorder to provide the best eating experience rather than “fast-food experience, we aretrying our best to provide the best eating experience at Chipotle by also emphasizing onsanity, interior design, service and atmosphere. As a result, Chipotle has the followingbrand attributes: Better ingredients Tasty food Fresh cooking used and grow in Clean restaurant Sustainable design sustainable ways Fun and energetic for each restaurant Naturally-raised Chipotle culture Fast and organized meat Wonderful dining Community Use sustainable experience building-support resources for food Implement the local farmers and production concept “Food with work with large Friendly service Integrity” (FWI) food distributors
  • 11. Part II: Brand Exploratory – Customer View  Measuring Sources of Brand Equity of Chipotle—Capturing Customer Mindset  In order to access Chipotle’s brand exploratory, our group has constructed a series of qualitative and quantitative research to capture and measure sources of Chipotle’s brand equity In order to effectively build and manage brand equity, it is consequential to knowwhat customers think of Chipotle in terms of brand image, their beliefs and attitudetoward different brands, feelings, thoughts and perception. So we need to understandconsumers’ mindset by systematically conducting researches to measure sources ofcustomer-based brand equity. So we will measure that through both qualitative andquantitative research techniques. Chipotle Brand Tracking – Capturing consumer mindsetPurpose: In order to effectively build and manage brand equity, it is consequential toknow what customers think of Chipotle in terms of brand image, their beliefs andattitude toward different brands, feelings, thoughts and perception. So we need tounderstand consumers’ mindset by systematically conducting researches to measuresources of customer-based brand equity.
  • 12. Research Techniques: Qualitative and QuantitativeAspects to Measure: Brand Awareness Brand Response Brand Association Brand Relationship Brand Image Brand Awareness (recognition of distance, angel, speed, perceived package size) We measure Chipotle brand awareness in terms of brand recognition and brandrecall in order to determine the strength of Chipotle in consumer’s memory. Brandrecognition also is crucial for packaging. So we are eager to know if packaging isdistinctive enough to capture customers’ attention in the distance. Also we want to knowif our customers are able to recall some core brand elements like the name, logo, andsymbol and so on under some certain circumstances. What appears in your mind when you think of Chipotle? Finish this link C_I_O_L_ See if you can be aware and assess package designs of Chipotle. If you want to have a fresh and tasty burrito, which restaurant would you consider going? If you want to dine in a Mexican restaurant, which restaurant would you go? When do you think of your favorite fast food restaurant, what comes to your mind?
  • 13. Brand Association We use free association task to determine what subjects come to consumer mindwhen they think of Chipotle. And in this way, we can identify the range of possible brandassociations in consumers’ minds and indicate the relative strength, favorability, anduniqueness of brand associations. Tell me what’s on your mind when you think of Chipotle. What does Chipotle name mean to you? What do you like best about the Chipotle? What do you dislike the most? What do you find unique about the Chipotle? How is different from brands? Who eats at Chipotle? In what situations? When and where do they eat at Chipotle? What do you think the reason why others like Chipotle? Brand Image Brand image of Chipotle is reflected by the associations consumers hold. Butunlike measuring brand associations, we will analyze the specific attributes of Chipotleconsumers think and their level of consideration to dine in Chipotle at a regular basis.
  • 14. What are the strongest associations you have to Chipotle? What comes to mindwhen you think of Chipotle? (Strength) What is so good about Chipotle? What do you like about Chipotle? What do youlike or dislike about Chipotle? (Favorability) What is unique about brand? What features does Chipotle share with otherbrands? (Uniqueness) Brand Response We are curious about how consumers can combine all their considerations tomake a final purchasing decision. We need to specifically measure purchase intentionof our consumers. And we will focus on the likelihood for consumers to buy Chipotle orswitch to another brand by giving consumers scenario to see if consumers would like topick us. “Assume you are very exhausted and hungry and you want to eat a delicious burrito that will take less time to cook, and it is also fresh, healthy and filling. Also, you want to find a nice place to cheer your mood up. If you go to downtown and see lots of restaurants, which one will you go? ”
  • 15. Brand Relationship We will emphasize on two out of four dimensions : behavior loyalty and brandsubstitutability to measure brand relationship. We can ask consumers some surveyquestions to evaluate brand relationship as following: How often do you eat at Chipotle? When was the last time you eat at Chipotle? Which brand of burritos did you consider buying? Which brand of burritos will you buy next time? If Chipotle is not available in your area and you want to have a fresh burrito, what would you have done? Or what other brands would you consider and why?  Customer Knowledge – What do customers think about Chipotle? The results from our marketing search and other sources such as comments onChipotle Facebook and Yelp allow us to conclude that a typical consumer brandassociations for Chipotle might be “love,” “big burritos,” “fresh,” “tasty,” “naturally-raisedmeat,” “organic ingredients,” “casual dining experience,” “the outside and inside look ofthe restaurant,” “Mexican,” “see you food being made in front of you” and so on. Inaddition, the Consumer Reports ranked Chipotle as the best Mexican fast-food chain in
  • 16. 2011, proving that Chipotle has successfully advanced its mission to serve “Food WithIntegrity” and its commitment to building a unique and special people culture. Mantra “Food With Integrity” Mental Map
  • 17. Sources of Brand Equity The following sources have helped create high brand awareness plus strong,favorable, and unique brand image for Chipotle: The Chipotle name, which means “smoked and dried chili pepper” in Nahuatl, thenative Aztec dialect, is one of the sources of Chipotle’s brand equity. In addition to itsauthentic sound, Chipotle also chose the name because most of its food containsground chipotle pepper. This brand name seems to receive high awareness fromcustomers. The Chipotle Pepper Harvest logo is also a key source of equity. The newlogo on the right seems to receive better perception from the customer. Chipotle’s brand equity is mainly contributed by the safe and great-tasting foodthat it provides the customer. Chipotle’s burritos are usually perceived as huge ones,which customers think worth their money. Chipotle’s commitment to using not only freshbut also high quality raw ingredients such as naturally raised meat, organic produce,and even dairy free of added hormones has created a differential effect in customers’
  • 18. knowledge, especially to those who are health-conscious. Customers are exposed tothe concept of “Food With Integrity,” “Naturally-raised meat” when they are in Chipotle’srestaurants or heard from friends. Customers will be curious to try Chipotle’s food to seethe difference. Another important source of equity is the Chipotle website, which is fun,attractive, creative and informative. It allows customers to locate Chipotle restaurantsand place orders easily. The website also provides a wide-range of details aboutsources of the ingredients, nutritional information, and the history about Chipotle.Customers have a relaxing and curious feel when they visit Chipotle website becausethere are interesting things that they can explore. For example, the website showsvisitors how pigs should be raised, how their produce is grown, and recommendedreading. The casual-dining experience in Chipotle’s restaurants is also an essentialsource of equity. Customers said they are attracted by both the outside and inside lookof Chipotle restaurants. Also, having a chance to smell, see, and feel the sounds, thesmells, and the sights of cooking can really help customers work up an appetite. This isa unique association which makes Chipotle different from other fast-food and fast-casual brands. Moreover, each Chipotle is designed with a kitchen that’s open to the entirerestaurant. Each ingredient is laid out in front of you so customers can choose the
  • 19. perfect combination to make their meal. They can watch the process as their burrito,bowl, tacos, or salad is prepared exactly the way you want it and handed to them almostinstantly. Some customers even said “they feel safe about their food because they cansee how their food cook and made in front of them, and it doesn’t seem they are hidinganything from us.” Finally, the interior design of Chipotle and the music would make it afund and interesting place for customers to eat with families and friends. Not only does Chipotle aim for quality food, but also for environmentally friendlypackaging. Their bowls are made from recycled newsprint. They use unbleached trayliners, napkins and cups that are made from post-consumer waste. These proprietarybusiness practices separate Chipotle Mexican Grill from the rest of the sub-standard,unethical, animal abusing brands in the restaurant industry. An additional source of equity for Chipotle is its image as a community builder asit works with local farmers to buy their organic produce. Also, through local eventssponsorships, Chipotle has established its unique image in the eyes of the customers inthose regions. Another source of Chipotle brand equity is their creative packaging. Chipotle putsgreat stories sent by the customers or hand writing narratives about their “Food WithIntegrity” philosophy. Some customers said that they love reading the stories on theircups while having the meal, while others said they knew Chipotle is using naturally-raised meat through the stories on their cups.
  • 20. Customer-Based Brand Equity Model Customers love Chipotle -Brand Loyalty -Customer Engagement. -Well-known for high Resonance quality burritos. -Fun experience -High credibility on -Fresh the sources of food. -Healthy Feelings Judgements- Fresh, Big burritosmade of Organic -DistinguishedIngredients, smoked jalapañoNaturally raised logomeat -Interior design of- Quick & friendlyservice, a higher but Performance Imagery the store; wood and metal.reasonable price Salience High quality burritos, casual dining More depth than breath Known but not very Prominent Brand Awareness
  • 21. Competitive Review Fast-casual restaurants market Chipotle positions itself as a fast-casual trendy restaurant which provides tasty, bigburritos made from high-quality organic ingredients at an affordable price: higher thanfast food but lower than the price of family restaurant, which satisfies the need for mostAmerican consumers: an growing demand to consume health food: fresh, natural andnutritious. Even though Chipotle was one of the earliest restaurants to promote thisindustry, Chipotle is still facing fierce competitions in this industry. Competitors in thefast-casual Mexican market include Qdoba Mexican Grill, Moe’s Southwest Grill andBaja Fresh. Figure 1: Figure 2: Favorite QSR/Fast Casual Favorite QSR/Fast Casual Restaurant Ranked by Number of Restaurant Indexed by Votes Location Count
  • 22. Figure 3: Chipotle Restaurants State-by-state breakdown Fast-Food restaurants market Consumers who perceive the fast service of Chipotle will form a wrong impressionthat Chipotle belongs to fast-food market. But the fact is that Chipotle does sharecertain characteristics that correspond with fast-food market: reasonable price, fast-service. Unlike fast-food restaurants, Chipotle serves burritos fast without providing“fast-food experience”.
  • 23. Strongest market competitors Points of shared parityFresh, healthy ingredients Serve fresh, high-quality foodFast Service Health-consciousnessTasty burritos Serve food in a cleanCooking in open spaces, 100% environmenttransparency Reasonable pricingServe food in a cleanenvironmentReasonable pricing Points of shared differenceA variety of food options in menu (queso, A variety of food optionsburrito, fajita, breakfast) FranchisingDistinctive flavor: roasted, slightly sweet, fire-grilled Customer rewarding program: E-Catering Service club, gift cardQ-cash Card reward program“Our Sound” (more music options, free musicdownloading)Innovative, inviting interaction encourageconsumes try different things.Franchising
  • 24. How Chipotle Is DifferentPoints of Parity! ! ! Points of Difference Fresh Food With Integrity Healthy High quality food Fast casual dining Naturally raised meat Burrito Organic produce Mexican Grill The restaurant experience The unique story in founding the company Sustainable restaurant designs Strengths Weaknesses S Innovation Availability of brand specific W Strong management team sourced foods Strong brand equity Limited menu O Strong financial position High costs for ingredients T Community Involvement Slightly higher price than its Strong Focus on Quality competitors A Opportunities Threats N Product Branding High competition in burritos A Asset Leverage market L Emerging markets and overseas Economic slowdown Y expansion Lower cost competitors or Offer products in grocery stores imports S Expand secret menu Price wars I Emergence of other similar fast- S casual chains in the market Substitutes
  • 25. RecommendationsExpand domestically first and internationally later to enhance brandawareness while maintaining the core value of the brand: Currently, a lot of customers ask Chipotle to open new restaurants in their areasbecause they love Chipotle’s burritos. This is a good trend for Chipotle to expand itsbusiness and the breath of brand awareness. However, Chipotle needs to keep trackwith its “Food With Integrity” philosophy because this is the most unique image that itowns. Since it is difficult to look for supply in organic produce and naturally raised meat,Chipotle should be considerate in opening restaurants so that it could still maintain itsuniqueness. Chipotle brand awareness is still not strong yet, so it should not risk itsreputation by leaving its core values. Chipotle is having a few restaurants outside of the U.S, in Toronto and London,and people in these areas say that they love Chipotle, too. There are also requests fromcustomers in Europe for more openings. Chipotle needs to do more research in Europemarket for the potential openings of Chipotle. Again, if Chipotle ever decided topenetrate more extensively the international market, it would still need to consider notonly the taste and reference of local markets but also keeping the best ingredients intheir food. Finally, Chipotle could also explore the possibility of penetrating emerging
  • 26. markets, where people prefer Western food. However, we don’t think this will behappening for any time soon.Do more marketing and Local Activities: Since its first opening in 1993, Chipotle has built their brand equity solely onword-of-mouth about their high quality food. This is a perfect way to do marketing in therestaurant business. Chipotle corporate brand has gained awareness from customers,but the product-attributes are still considered higher than brand attributes. However,Chipotle has evolved to another higher level, where marketing and branding becomemore important. Therefore, Chipotle should have advertising programs such as TV ads,radios, and prints more often to leverage Chipotle brand. Second, Chipotle gained awareness because of its high involvement in localactivities. Based on the information provided on its website, Chipotle has held a lot oflocal activities in 2009 such as sponsoring circuit races, helping fund raiser, and so on.Recently, Chipotle seems to be less engaged in such activities. This is an important partof extending customer awareness, so Chipotle should consider being more involved inlocal community again.Find ways to gain more control in the naturally-raised meat andorganic produce. The biggest obstacle that Chipotle is currently facing is the limited supply for thehigh quality ingredients that it needs. If it could solve this problem, it would be a highlysuccess for Chipotle.
  • 27. Brand Extension In September 2011, Chipotle opened an Asian fast-casual concept restaurant named ShopHouse Southeast Asian Grill in Washington, D.C. The company has said the new restaurant "would follow the Chipotle service format and its focus on food with integrity in ingredients." Chipotle will start with only one store, and see how the restaurantworks out. ShopHouse Southeast Asian Kitchen features "cuisine inspired by Thai,Malaysian and Vietnamese cuisines" served in bowls or as banh mi sandwiches. Forthis brand extension, the points-of-parity and points-of-difference are following: Points of Parity Points of Difference Same service form as Chipotle Different brand elements (e.g. different Organic ingredient (food with integrity) brand name, logo, color, etc.) Same ways to feed animals Different cultures, styles and tastes of food.