Chipotle Mexican Grill
Dr. Thomas
MKTG 445-002
May 13, 2013
Arnold Farmer, Daniel Garmon, Wangui Muthaka,
Niravbhai Patel, Michelle Yang
Executive Summary
Chipotle Mexican Grill has become one of the most well known Mexican fast food restaurants.
With locations spanning across the United States, Canada and the United Kingdom, Chipotle has
grown extensively in popularity all while keeping its integrity to its food and consumers. In the
following report, we have prepared a marketing plan for Chipotle Mexican Grill and have
examined the qualifications necessary to expand Chipotle’s operations into the country of
Mexico. We have recommended expanding into Mexico City specifically which has a population
of about 19.5 million people, as well as a few other cities within Mexico. The following
addresses Chipotle’s growth strategy, justification of entering Mexico, target markets,
positioning and competition, entry strategy, as well as Chipotle’s marketing strategy.
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Company Description
In 1993 Steve Ells founded Chipotle Mexican Grill, a restaurant which serves Mexican style
food such as gourmet burritos, tacos and more (We've Got History, 2013). Chipotle focused on
using high-quality ingredients to make great food at an affordable price. The first Chipotle was
opened at a former Dolly Madison ice creamery in Denver, Colorado (We've Got History, 2013).
Ells later opened 7 more Chipotle locations in the Denver area by 1996 (We've Got History,
2013). In 1998, McDonalds invested in Chipotle and helped expand the company from 14
locations to over 500 locations by 2005. In 2006 McDonalds divested and Chipotle went public
on the NYSE. Currently, with over 900 locations in the U.S, UK and Canada combined, Chipotle
is known as a fast-casual restaurant that serves great quality food at the speed and convenience of
fast food (About Us, 2013). The term fast casual restaurant means that Chipotle serves restaurant
“quality” food, as opposed to the lesser “quality” food found in fast food places such as
McDonald’s, but with the same speed and efficiency. Typically store hours for a restaurant is
Mon-Sun from 11a.m to 10p.m. Prices are generally slightly higher than you would expect at a
regular fast food restaurant.
Product Description
Chipotle serves gourmet burritos and tacos made with the best ingredients (Food With Integrity,
2013). They source 100% of their pork from producers that follow strict guidelines, including a
vegetarian diet and pigs that are raised outside (Food With Integrity, 2013). They also source
100% of their beef from ranches that meet and exceed naturally raised standards (Food With
Integrity, 2013). Chipotle serves cheese and sour cream that comes from pasture-raised cows.
These cows have access to outdoor pastures, are never given added hormones, and are fed an all
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vegetarian, plant-based diet. Chipotle currently offers the following products on their menu:
burritos/burrito bowls, crispy/soft tacos, salads, chips, and guacamole (Menu, 2013). All
ingredients are part of Chipotle’s Food with Integrity commitment, promising to use the best
ingredients in their products (Food With Integrity, 2013).
Growth Strategy
The best growth strategy for Chipotle to enter Mexico is through market development. Although
Chipotle is a Mexican style restaurant, they are not currently operating in Mexico. Thus,
Chipotle will be entering a new geographic region looking to sell their existing products.
Identification & Justification for Entering Mexico:
Geographic Location
Mexico, officially called the United Mexican States, is the southernmost of the three federations
in North America (The World Factbook, 2013). It is the third largest country of Latin America
and shares a 2,000-mile border with the U.S (U.S Relations With Mexico, 2012). The close
proximity between the U.S can potentially provide cost saving opportunities in the transportation
of goods, logistics, and ingredient sourcing.
Political & Economic System
Mexico is a federal republic with 31 states and 1 federal district. Like the U.S, it follows a civil
law system (Constitution and Government). Mexico shares the same economic structure as the
U.S, a free market economy, and is classified by the World Bank as an upper-middle-income
country (The World Factbook, 2013). Most importantly, Mexico has a free trade agreement with
the U.S and Canada through (NAFTA) North American Free Trade Agreement. In addition,
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Mexico has trade agreements with over 50 countries, which, makes more than 90% of their trade
under free trade agreements (The World Factbook, 2013). Mexico and the U.S are key strategic
partners and have a long history of cooperation (U.S Relations With Mexico, 2012). They are the
U.S’s second-largest export market and third-largest trading partner. According to the World
Bank, Mexico’s ranks 48 out of 185 countries for the ease of doing business index, which
measures how conducive the regulatory environment is to the starting and operating of a local
firm (Doing Business, 2012).
Cultural & Buyer Behavior Traits
Mexico is a collectivistic culture whose citizens are living busier lives. Lunch in Mexico is often
a key business venue. During the week, typical lunches take place from about 1:30pm to 3:00pm.
(Mexico:Culture). Saturdays or Sundays are reserved for family activities (Mexico:Culture).
Chipotle can provide a place for both families and businesses while still appealing to the fast
pace lifestyle.
Overall Market Size & Nature
There is a tremendous amount of market potential in Mexico. Mexico is classified as one of the
world’s emerging markets by the Market Potential Index (MPI), which measures various
indicators such as: market size, growth rate, consumption capacity, economic freedom, and
country risk (MPI for Emerging Markets, 2012). Mexico is home to a growing population of
around 115 million, with almost 55% of the population aged 24 years old or younger, one of the
highest percentages for an upper-middle-income economy (Mexico Food & Drink Report, 2013).
The population in Mexico is also largely urbanized. Roughly 78% of the population lives in
urban areas (The World Factbook, 2013). This growing population is also forecasted to increase
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per capita consumption growth by 24% by 2017. (Mexico Food & Drink Report, 2013). Cafes &
restaurants make up a growing 30% market share and fast-food is roughly 8.30% market share.
(Foodservice Industry Profile: Mexico, 2006). Chipotle will appeal to both the fast food markets
and restaurant markets due to its unique fast dining experience. Mexico is also one of the biggest
tourist destinations and in 2011 was ranked the 11th most visited country. (Mexico Tourism
Report, 2013). In 2011, approximately 78% of tourists arriving in Mexico were from the U.S and
Canada (Mexico Tourism Report, 2013). This is important because Chipotle already has brand
awareness in these countries.
Buyer Power
Rising disposable incomes and solid appreciation of the Mexican currency has allowed the
Mexican consumer to be able to afford more (Mexico Food & Drink Report, 2013). In terms of
GDP per capita based on the purchasing power parity, Mexico has experienced increases in the
past several years and a 2012 estimate shows this number at $15,300 (The World Factbook,
2013). The disposable income is expected to increase in the coming years despite the world
economic downturn that has plagued many countries growth (Mexico Food & Drink Report,
2013).
Description of Positioning
Chipotle will be using the local consumer culture positioning strategy to enter Mexico in order to
put its brand in the consumers’ minds over and against its competitors. This will allow us to
identify with the local cultural meanings since we will be serving Mexican food. The Mexican
nation has traditionally been characterized by strong local cultural identities (Ember, 2001).
People identify closely with their own state/region so Chipotle would fit right into the Mexican
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market (Ember, 2001). The three main products found in a Mexican meal are: corn, hot peppers
and beans, all of which are key ingredients that Chipotle serves, as well as different types of
meats and tortillas (Ember, 2001). However, due to the fact that food is extremely
environmentally sensitive product we will adjust the taste of our food to fit the wants of the
Mexican people. This will require local adaption of our products so that the local people will
consume our food. Chipotle will also be using the positioning strategy of having the highest
health quality at a reasonable price. Unlike the United States, Mexican meals are healthy and
correctly portioned. This is an opportunity for Chipotle to cut cost strictly from portion sizes
because inventory will be able to be stretched as compared to American counterparts. Chipotle’s
positioning strategy will be to provide healthy, high quality, organic foods that match the taste
preferences of the Mexican culture for a reasonable price.
Description of Competition
There are many competitors that Chipotle will have in Mexico. These competitors would be
other fast-casual, quick-service and casual dining restaurants (Chipotle's Annual Report, 2012).
We would compete based on a number of factors which include: taste, quality, speed of service,
price, value, name recognition, location, menu variety, customer service and the ambience and
condition of the competitor. Just like Chipotle’s main competitors in the United States,
McDonalds, KFC, Burger King and Subway will also be its competitors in Mexico (Chipotle's
Annual Report, 2012). (Table 1) shows the revenues of some of the main competitors in the
Mexican food industry including: Alsea, McDonald’s, Burger King, and Yum! Brands.
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Top Mexican Competitors in Fast-Food Industry
Net Income MXN million (loss)
2006
2007
2008
2009
2010
Alsea
228.6
489.1
1.2
(21.7)
151.2
McDonald’s
3,544.2
2,395.1
4,313.0
4,551.0
4,946.0
Burger King
27.0
148.0
190.0
200.1
186.8
Yum! Brands
824.0
909.0
964.0
1,071.0
1,158.0
Source: Company Filings
We will face additional competition from local vendors in Mexico that serve similar food. These
local vendors serve tacos and burritos on food carts at substantially lower prices than our
products. Most of the multinational competitors are using the same strategies that they use in the
their home countries. The only main differences in their strategies is that they have their menus
in Spanish instead of English, while at the same time offer the exact same food. An example of a
restaurant that implements the same strategies is Subway. According to their menu on their
Mexican website, every product is the exact same as its American counterpart (Subway
Restaurants International Menu, 2013). There are many competitors in Mexico, but most of them
are implementing the same strategies they use in other countries, that’s where we are different.
We will be implementing different strategies based on the location we are targeting our products.
Segmentation
In Mexico, 78% of the total population lives in an urban area (The World Factbook). Mexico
City, the capital of Mexico, is the second largest urban agglomeration in the Western
Hemisphere with a population estimated at around 20 million people and would be a huge
consumer segment target for Chipotle. Not only does this geographic segmentation contain a
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huge population, it also is the economic center of the country. GDP per capita in Mexico City is
twice as high as the national average and compared with the rest of the world’s urban
agglomerations it was ranked eight out of the top thirty in 2008 (Research & Insights, 2008).
Therefore, we want to go after the urban professional consumer segment. In Mexico, urban
professionals often eat meals at restaurants or street side stands (Axiom Press, 2010).In fact,
many Mexicans eat four daily meals: a light breakfast, an early lunch, a main meal in the late
afternoon, and a light snack called a cena or merienda at night (Axiom Press, 2010). Lunches
can last several hours and are typically eaten between anywhere 1:30pm -3:00 pm or later
(Mexico: Culture). We want to target the urban professional and not just give them a place to eat
but also talk business.
Product
Chipotle in Mexico will serve the same foods as they currently do in existing US, UK, and
Canadian Chipotle restaurants. However, a few changes and additions will be made to the menu
in order to appropriately suit the wants and needs of the Mexican citizens. Chipotle will offer a
variety of meats including: beef, chicken and pork. For over thousands of years, corn has been
the basis of the Mexican diet. It can be found in almost every meal, usually in the form of the
tortilla (Food in Every Country, 2013); Chipotle will offer corn and tortillas in its restaurants in
Mexico. Chipotle will also offer Mexican cheese and use creama which is the Mexican sour
cream. Much of the sophistication of Mexican cuisine comes from the use of more than one
hundred different types of chilies, which range from the large and "sweet" chile ancho to the
small and dangerously hot chile habanero (Ember and Ember 1447-1451). Chipotle will use
spicier ingredients in their food because Mexicans prefer spicier foods including the use of a
variety of chilies like jalapeño, poblano and serrano (Food in Every Country, 2013). Mexicans
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generally have a light breakfast of coffee and/or fruit before they leave for work or school. Thus,
Chipotle will incorporate a breakfast menu with fruit salads and coffee. Chipotle will offer food
smaller portions than the US because Mexicans tend to consume less than Americans do.
Mexicans prefer their coffee spiced and sweet (café de olla) (Food in Every Country, 2013).
American soft drinks, such as Coca-Cola, have become popular in Mexico in recent decades, but
fruit-flavored soda drinks as well as fresh fruit juices are also widely consumed (Food in Every
Country, 2013). Chipotle will introduce these drinks in its restaurants in Mexico. Mexicans also
consume large quantities of beer therefore it would be a wise strategically for Chipotle to offer
Mexican beer at its restaurants.
People
Anyone who comes into contact with our customers will make an impression and that can have a
profound effect- positive or negative- on customer satisfaction (Chartered Institute of Marketing,
2009). Chipotle’s brand rests heavily on its employees. Therefore, Chipotle will hire highlymotivated individuals who have the right attitude to work in the restaurants opening in Mexico.
Chipotle will ensure that employees are properly trained so they can properly serve customers to
the best of their ability in order to satisfy their wants and needs. Chipotle will also hire Mexicans
to work in the restaurants as they are already familiar with the Mexican culture, they speak
Spanish fluently and thus they will be able to properly identify themselves with our customers.
Place
Chipotle’s location in which it will be able to service its customers will be in highly populated
area as well as heavy foot trafficking areas such as Mexico City, Ecatepec de Morelos, and
Guadalajara. According to a 2012 census, Mexico City has a population of about 19.5 million
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people (City Populations, Largest Cities of the World, 2013). Chipotle will be located within
walking distance of popular city businesses. Having these locations, we are able to provide a
restaurant that is fast pace for customers in a rush as well as families looking to sit down and
enjoy their meals with each other.
Promotion
In order for Chipotle to reach their customers in Mexico, Chipotle will have to promote through
everyday activities. Mexicans are known to love their telenovelas, Spanish soap operas, in which
Chipotle can take full advantage of through commercials. Unlike the typical American lunch
break, Mexicans leave work midday for a few hours to take their largest meal of the day. During
this time family members gather together as a whole to eat, relax, and nap. With the convenience
of families gathered at lunch, Chipotle could take advantage of televised advertisements during
the telenovelas. Chipotle will also utilize internet advertising, where it was reported to have been
“the fastest growing advertising medium” (Lead Generation and Internet Marketing in Mexico,
2010). In addition, Chipotle may also promote through televised advertisements during their
famous football games. These ways of promotion will reach a large population of Mexico’s
audience. Chipotle will also promote through sponsorships of the Mexico national football team.
This will allow Chipotle to gain recognition by fans as well as by fellow watchers.
When promoting Chipotle we want to ensure the consumers in Mexico that we are using organic,
local, and family farmed products. Chipotle currently provides the US, UK, and Canada with
“Food with Integrity.” Chipotle in Mexico will continue to instill these same values:
“finding the very best ingredients raised with respect for the animals, the environment and the
farmers” (Food With Integrity, 2013).
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Process
To deliver food to our customers Chipotle has created an effortless assembly line that is simple
and easy being most convenient for the customer. Each ingredient is laid out in front of you so
you can choose the perfect combination to make your ideal meal. Customers watch the magic
happen right before their eyes from the beginning to finish product. Starting with the packaging,
customers may choose their product, whether it be burrito, tacos, etc… followed by a choice of
white or brown rice, black or pinto beans as well as meat selection ranging from chicken, beef or
pork. Additional touches such as corn, salsa, cheese, lettuce, creama, and guacamole may then
be added to conclude the preparation of the meal. Supplementary products such as fruit salads,
soft drinks, chips, etc… may then be ordered prior to payment.
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References
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www.chipotle.com/en-US/company/about_us.aspx
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