Chipotle’s real problem

 

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It’s been months since Chipotle’s recent E. Coli scandal was officially declared over.  Why then, is the brand still struggling with its stock price and sales at record lows? It’s more than the 500 people who have gotten sick from Chipotle’s food.  It’s the failure of their brand purpose.

Starbucks had a similar E. Coli scare with sandwiches not so long ago, and while no one got directly sick from their food, more than 1,000 of their stores were affected.  Why did Starbucks emerge from this scandal relatively unscathed? The brand is recognized for offering quality products, but it is not the core purpose upon which the brand rests like Chipotle.   

What is a brand purpose and why is it so important?

A brand purpose is the intention of what a company wants to change for the better.  It’s not one of those lofty statements a company puts on the wall and never looks at again, but rather a guiding light for decision making, uniting company culture and inspiring transformational ideas.  Coke wants to see more happiness, Disney wants to see more magic, Virgin wants to see more rebellion, and Chipotle wants to cultivate a better world.

For Chipotle, since their inception, they’ve told consumers about how they source from farms rather than factories, how their foods contain no GMOs or how they actually cook in their kitchens.  All of these facts were a basis for which Chipotle could stand on its “cultivating a better world” purpose.  Such differentiators have positioned Chipotle apart from other fast food competitors and gained hard-to-earn loyalty from Millennials as well as millions of other consumers.  In fact, previous to the outbreak, Chipotle was one of the foremost purpose-driven companies, ranking 3rd among the top brands that best met Millennial consumers’ expectations and to which they were the most loyal.  Nonetheless, when a brand either does something or something occurs to defy this purpose, consumers lose trust and will accordingly spend their money elsewhere.  This has manifested abruptly for the chain: Chipotle’s consumer perception index from around 9 (positive) in September 2015 to a negative 12.5, only months later in December 2015.

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Evidently, in this ever-changing consumer marketplace, adhering to a brand purpose has never been more important. New York-based brand consultancy Landor surveyed more than 1,000,000 consumers across 51 countries about 55,000 brands in order to determine how and why certain brands are succeeding better than others in such a rapidly changing landscape. Consumers reported that the strongest brands possess two seemingly contradictory sets of attributes, leading and true; ‘leading’ refers to a brand’s ability to stay up to date and pioneering, whereas ‘true’ encompasses authenticity and relevance– this is where a meaningful brand purpose lives.  Other studies have reaffirmed the same importance: a 2015 study by Harvard Business Review and Ernst and Young showed that companies with a strong sense of purpose are able to transform and innovate better. In regards to employees, the study found that if people have a greater sense of purpose, profit will follow as well.

Just in case you haven’t yet grasped the importance of purpose-driven brands, here’s some stats:

  • Consumers in the U.S. are more likely to trust a brand that shows its direct impact on society.  
  • Upwards of 80% are more likely to purchase from a company that can quantifiably show how it makes a difference in people’s lives—beyond just adding to the investment portfolio of a very select few.  
  • 88% want to hear what brands are doing to have a real impact, not just that they are spending resources toward a cause.
  • 90% of consumers would boycott if they learned of a company’s irresponsible practices.  
  • The meaningful brands outperform the stock market index by 127%.  

Although defying their brand purpose has caused Chipotle to take a tremendous hit for disobeying consumer trust (and will continue to for the foreseeable future), it’s not to say that the brand can’t eventually come back from this. Since the public became aware of the outbreak, Chipotle has been forthcoming and taken the proper measures in addressing the issue.  Thus far, they closed every store nationwide on February 8th to hold a company-wide meeting, closed stores in affected markets for deep cleaning, and immediately moved to implement new food safety procedures.  Already, Chipotle has reassessed its food safety practices to develop a comprehensive plan that aims to “establish Chipotle as an industry leader in food safety,” and consolidate their troublingly-complex network of 100 suppliers for 64 ingredients.  To further prove their dedication to their “cultivating a better world” purpose, Chipotle plans to spend $10 million to help local farms meet food safety standards and to make more local ingredients available across the country.

It has been proven countless times that brands firmly rooted in their purpose are more capable of innovating.  While Chipotle has faced widespread doubt about the integrity of their purpose, it’s possible that this crisis has forced the company to refocus and reprioritize the intention that they originally set out to achieve.  Only time will tell, however, if Chipotle will be able to successfully regain consumer confidence and take the necessary measures to ensure an outbreak like this never happens again.

What do you think?  Are you returning as usual to Chipotle or living contently without their burritos?   

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