A few days ago, in a matter of hours, Chipotle stock took a tumble to the tune of 6.5 percent. What could cause such a sudden loss in the otherwise stellar valuation and track record of the restaurant industry darling?
A viral video of Chipotle employees misbehaving in the kitchen?
A nationwide shortage of tortillas?
Chipotle stock, in the delightful words of The New York Times, fell faster than a lead burrito because of the words of one man, cult financial guru and hedge fund manager David Einhorn.
Einhorn called the company overvalued – and in a macrocosm of self-fulfilling prophecies, investors proceeded to sell, sell, sell at a pace more than four times the stock’s average daily trading volume.
Now, I do not profess to be anything close to a Wall Street savant. I know enough of investing to know that mutual funds rarely outperform index funds in the long run. I also know the stock market, as proven by Mr. Einhorn, is basically a giant mood ring worn by the nation as a whole.
But it was one of Einhorn’s justifications for his bearish take on Chipotle stock that struck a nerve in me in particular. Taco Bell and its new ‘Cantina Bell’ upscale menu, he reasoned, would soon enough lure customers away from Chipotle and its higher-priced offerings.
It smacked of a certain arrogance to the reasoning behind why people eat where they eat. Sure, price plays a large and sometimes deciding factor. But so, too, does quality. And to Chipotle’s credit, quality has evolved to mean much more than taste.
Chipotle embraces and communicates quality as well as any national chain by fusing it with causes that reach well beyond consumers’ taste buds. The company sums its philosophy up with three words: Food with Integrity. It means “finding the very best ingredients raised with respect for the animals, the environment and the farmers.”
In 2011, the company enlisted a London filmmaker to create an emotional stop-motion video packaging up those principles to the tune of a custom Coldplay cover recorded by country music legend and Farm Aid President Willie Nelson. The video debuted on YouTube and after racking up millions of views was repurposed into a Chipotle ad that aired during the 2012 Grammys.
The emotions the video elicits in people are exactly the reason why, in my opinion, Einhorn oversimplified the perceived threat to Chipotle by Taco Bell’s ‘Cantina Bell’ menu. Taco Bell may now be focused on quality, but Chipotle is focused on quality with a cause.
It reminds me of an old Barkley PR (now Crossroads) belief relating to companies and causes: When you stand for something greater than your bottom line, people stand with you.
Chipotle has made what it stands for the forefront of its marketing communication – and consumers recognize it. It’s why I believe they and I will continue to choose Chipotle over Taco Bell when in the mood for quick and quality Mexican food.
Unless it’s after 10 p.m. and alcohol is in the equation. In that situation, all bets are off.
Photo credit: Dion Hinchcliffe