Summary:
American-Mexican food restaurant chain Chipotle has a strong following in the U.S. They seem to have trouble translating this success as it expands overseas. The south-of-the-border food is failing to attract a following across the pond in London.
Why choose to expand abroad into a market where similar products have struggled?
Mexican food has always struggled in the U.K. Taco Bell launched in the U.K. in the late 1980s and had 3 outlets in London and 1 in Birmingham. All 4 were closed by the mid 1990s. Taco Bell returned in 2010 and now has three whole (sarcastic emphasis added) restaurants in the U.K. Taco Bell positions itself at the lower end of the price-spectrum. Chipotle positions itself at the higher end as “gourmet burritos and tacos” as American-style Mexican food.
U.K. burrito chain Tortilla was founded in 2007 by California-native Brandon Stephens. By February 2013 after 5+ years, Tortilla has opened 11 restaurants.
Hardly numbers which are going to move the needle to a company the size of Chipotle. But Chipotle seems to be spreading itself too thin when it comes to international expansion. In Canada, Chipotle has opened 5 stores in 5 years. This reduces Chipotles ability the achieve scale in operations, sourcing, marketing, etc. in any single market, in effect weakening its position in each market.
Why choose to expand abroad into a market where consumers are unfamiliar with your products?
Given the proximity to each other, there are obviously more Mexicans in the U.S. than the U.K. This makes Mexican food staples like salsa, guacamole and tacos novel and unfamiliar in the U.K.. Customers even had basic questions on how to just eat the food - some would unwrap their burrito to eat it.
Why choose to expand abroad and then not invest in marketing to educate and entertain potential customers?
KFC, McDonald's, etc. have been successful expanding abroad in part because they were selling American-culture in an age of America The Undisputed Superpower.
Most Londoners are not yet familiar with the Chipotle brand. This is no surprise given they have 6 stores and have not done any interesting marketing. Chipotle is not selling American culture. It needs an angle. Chipotle could have some interesting and fun marketing around Mexican and American themes to educate people about the food and the restaurants.
Chipotle's prices are not helping. in the U.K., many diners have a mental barrier against paying more than £5 for a lunch item. Chipotle’s burritos start at £6.50. If you want to charge a premium, you need to use marketing and the customer experience to convince customers the premium is justified.
Source: "Why Chipotle Sales Lag in London", BusinessWeek, February 26, 2013
http://www.businessweek.com/articles/2013-02-26/why-chipotle-sales-are-low-in-london#r=hpt-ls
CKB Solutions is all about real solutions for the real world. To learn how we can help your business, contact Greg Kovacic in Hong Kong.
- Mexican food is unfamiliar to most Londoners and Brits.
- Chipotle is struggling in its international expansion plans, including London.
- Many other competitors have failed to gain significant traction in the U.K., which raises the question of why target this market?
- Chipotle is expensive compared to the alternatives. This strategy works when selling an experience in an emerging market, but not in an advanced market with insufficient marketing and many alternatives.
- Chipotle is spreading itself too thin (pun intended): Few restaurants means lost opportunity to take advantage of scale in operations, sourcing and marketing, further raising the hurdle to successful expansion. It should focus on a few specific markets and achieve scale before entering a new market.
- Chipotle needs to invest in marketing which is educational (about the food) and entertaining/humorous (about the Mexican-American angle) to create an image and atmosphere which makes people want to first try, and second come back with friends.
American-Mexican food restaurant chain Chipotle has a strong following in the U.S. They seem to have trouble translating this success as it expands overseas. The south-of-the-border food is failing to attract a following across the pond in London.
Why choose to expand abroad into a market where similar products have struggled?
Mexican food has always struggled in the U.K. Taco Bell launched in the U.K. in the late 1980s and had 3 outlets in London and 1 in Birmingham. All 4 were closed by the mid 1990s. Taco Bell returned in 2010 and now has three whole (sarcastic emphasis added) restaurants in the U.K. Taco Bell positions itself at the lower end of the price-spectrum. Chipotle positions itself at the higher end as “gourmet burritos and tacos” as American-style Mexican food.
U.K. burrito chain Tortilla was founded in 2007 by California-native Brandon Stephens. By February 2013 after 5+ years, Tortilla has opened 11 restaurants.
Hardly numbers which are going to move the needle to a company the size of Chipotle. But Chipotle seems to be spreading itself too thin when it comes to international expansion. In Canada, Chipotle has opened 5 stores in 5 years. This reduces Chipotles ability the achieve scale in operations, sourcing, marketing, etc. in any single market, in effect weakening its position in each market.
Why choose to expand abroad into a market where consumers are unfamiliar with your products?
Given the proximity to each other, there are obviously more Mexicans in the U.S. than the U.K. This makes Mexican food staples like salsa, guacamole and tacos novel and unfamiliar in the U.K.. Customers even had basic questions on how to just eat the food - some would unwrap their burrito to eat it.
Why choose to expand abroad and then not invest in marketing to educate and entertain potential customers?
KFC, McDonald's, etc. have been successful expanding abroad in part because they were selling American-culture in an age of America The Undisputed Superpower.
Most Londoners are not yet familiar with the Chipotle brand. This is no surprise given they have 6 stores and have not done any interesting marketing. Chipotle is not selling American culture. It needs an angle. Chipotle could have some interesting and fun marketing around Mexican and American themes to educate people about the food and the restaurants.
Chipotle's prices are not helping. in the U.K., many diners have a mental barrier against paying more than £5 for a lunch item. Chipotle’s burritos start at £6.50. If you want to charge a premium, you need to use marketing and the customer experience to convince customers the premium is justified.
Source: "Why Chipotle Sales Lag in London", BusinessWeek, February 26, 2013
http://www.businessweek.com/articles/2013-02-26/why-chipotle-sales-are-low-in-london#r=hpt-ls
CKB Solutions is all about real solutions for the real world. To learn how we can help your business, contact Greg Kovacic in Hong Kong.
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