Taco Bell’s former chief aims to restore Chipotle’s growth

CNBC stock analyst Jim Cramer is excitable by nature, but the former hedge fund manager was really frazzled after hearing who was hired as Chipotle Mexican Grill Inc.’s chief executive. Chipotle — the fast-growing burrito chain that became the anti-Taco Bell with food steeped with fresh ingredients, then was rocked by highly publicized outbreaks of E. coli and other food-borne illnesses in late 2015 — had recruited, of all people, Taco Bell chief Brian Niccol as its next CEO.

Niccol was “the most opposite guy you could possibly find” and Chipotle promptly had set up “a culture clash,” an exasperated Cramer told viewers when Niccol’s appointment was announced Feb. 13. “It’s like naming a guy from the Army to run the Air Force.”

But others thought Niccol was a strong choice, based on his track record at Taco Bell, and Wall Street cheered. Chipotle’s battered stock, which had plunged 67 percent from its record high reached in mid2015, soared 15 percent that day amid hopes that Niccol could restore Chipotle’s sales growth and reputation among consumers.

“We’re hard-pressed to find a better fit for Chipotle’s CEO position than Brian Niccol,” Morningstar analyst R.J. Hottovy said in a note to clients. “Under Niccol’s leadership, Taco Bell has been one of the bright spots in U.S. quick-service restaurants.”

Niccol, 44, succeeded Steve Ells, Chipotle’s founder, who remains executive chairman. Niccol has his work cut out.

The food-safety woes not only damaged Chipotle’s reputation, they soiled the “Food with Integrity” narrative that the Denver-based chain and Ells carefully had crafted for two decades to fuel its growth. It was branding that portrayed Chipotle as a cut above its rivals with fresh, organic ingredients, strong customer service and pleasing in-store furnishings.

Chipotle’s burritos, burrito bowls, tacos and salads found a sweet spot amid Americans’ growing demand for healthier food. The chain was “once the benchmark by which fast-casual restaurant chains measured themselves,” Hottovy said.

Chipotle rapidly expanded, initially with a major investment from McDonald’s Corp., which eventually took over ownership of the chain. McDonald’s then began unwinding its position in 2006 when Chipotle went public at $22 a share. In early August 2015, the stock hit a peak of $757.77 a share — a 34-fold increase.

Then the food-safety scare hit. Diners stayed away, the stock tumbled and activist investor William Ackman swooped in, amassing a 10 percent stake in Chipotle. He secured two seats on its board in late 2016 in exchange for agreeing not to lift his stake above 12.9 percent or to make any disparaging public comments about the company for two years.