Chipotle Pushing To Build On 2009 Momentum

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Fresh off announcing an unusually strong Q4 and full-year 2009 (particularly by current restaurant industry standards), Chipotle Mexican Grill is looking to build on the momentum with a new marketing campaign to launch in Q2, a new rewards program and new packaging -- not to mention expansion into Europe.

For 2009 overall, the fast-casual chain reported revenue up 14% (to $1.52 billion), net income up 62% (to $126.8 million) and diluted EPS up 67% (to $3.95). The sales gain reflected both revenue from 121 new stores opened during '09 and comparable-store sales growth of 2.2% (including a 2% gain in Q4). Like other chains, Chipotle saw some traffic fall-off, but comp-store sales grew as a result of menu price increases instituted in 2008.

The price increases, combined with labor efficiencies and decreased marketing/promotional expenses, resulted in restaurant-level operating margin growth of nearly 25%.



Based on the '09 results and Chipotle management's indicators about current-year plans, the marketing expenditures conservatism seems to reflect strategic emphasis on ensuring bang for the buck via high-exposure, relatively low-cost channels.

In reporting the company's financials, co-CEO Steve Ells confirmed that Chipotle will continue to focus on its "Food With Integrity" positioning. He described that mission as changing "the way the world thinks about and eats fast food" by "providing the best dining experience we can and serving food made from the finest ingredients, which were raised with respect for the animals, the environment, the farmers and ultimately our customers."

Chipotle management confirmed that the theme will be the foundation for a new marketing campaign to debut in the second quarter and a new rewards program. In addition, new food packaging will explicitly employ the "integrity" tagline and seek to educate consumers about the chain's commitment to maximizing sustainable, natural sourcing (including naturally raised beef, chicken and pork).

Although not revealing specifics of the marketing campaign, Ells said that Chipotle had been working on it for a long time, and is now confident that it has "a really great approach." He also pointed to the chain's early 2010 exposure on "Oprah" as an example of "non-traditional marketing components" focusing on a "larger conversation about issues in food" that are planned throughout 2010.

The "Oprah" appearance resulted in the brand's reaching about 5 million people and generated noticeable upticks in both restaurant and Web site traffic, according to Ells.

Ells also announced that Chipotle will open its first London location in May, and is actively searching for more locations in London, Paris and Germany. In total, the chain expects to open 120 to 130 new locations this year.

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