This article demonstrates everything that’s wrong with Wall Steet.
Chipotle’s marketing strategy has become “stale” in the minds of consumers and its millions of dollars in free food offers aren’t working.
Then a quoted analyst goes on to say:
Saleh thinks Chipotle needs to fire workers to reduce its labor costs, and even suggests shifting away from “food with integrity” – which has long been the cornerstone of Chipotle’s appeal and marketing strategy – to lower food expenses.
He said Chipotle’s labor expenses have ballooned to nearly 30% of sales since the E. coli outbreak. By comparison, in 2014 and 2015, labor accounted for 22% of sales and 23.2% of sales, respectively.
According to Saleh, customers no longer trust the company’s “food with integrity” promise, so Chipotle should also consider letting go of naturally raised ingredients.
“Chipotle has historically operated with higher food costs than many of its competitors as many of its ingredients are naturally raised and more recently, non-GMO,” he writes.
In 2014, that meant Chipotle’s food costs accounted for nearly 35% of sales, which is well above the 30% average of most restaurant operators.
So, Chipotle, which has promised to use non-GMO food and naturally grown food, suffered an e-cold outbreak, which itself was kind of suspect, and sales have suffered as a result. Now analysts want the company to abandon using the higher quality food, and lower employee costs, so that profits can get back in line.
The high quality food is probably one of the main reasons why people go to Chipotle. All Wall Street cares about is profits, profits, profits.
Fortunately a Chipotle spokesperson had this to say:
“Shifting away from naturally raised food to cut food costs is a non-starter,” Arnold said. “That is the essence of our business, and has driven our success for years. Moving away from that to realize short-term cost savings would not make any sense at all.”
Let’s see how long they can keep the Wall Street vultures at bay.