YUM Yum Brands Inc

By Julie Jargon 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 14, 2018).

Chipotle Mexican Grill Inc. on Tuesday named Taco Bell Chief Executive Brian Niccol as its next CEO, tapping a fast-food veteran to try to revive the struggling burrito chain.

Mr. Niccol, 43 years old, has run Taco Bell for three years as the chain has been the most successful in the portfolio of Yum Brands Inc., which also owns Pizza Hut and KFC. He will succeed Chipotle founder Steve Ells on March 5.

Mr. Ells said last year that he would step down as chief executive and become executive chairman to allow an outsider to address Chipotle's battles with food-safety problems and a decline in customer visits. On Tuesday, Mr. Ells said Mr. Niccol's "expertise in digital technologies, restaurant operations and branding make him a perfect fit for Chipotle."

Chipotle has struggled to lure back diners after food-safety scares began in 2015, including outbreaks of E. coli, salmonella and norovirus. The chain's problems attracted the attention of activist shareholder William Ackman, who negotiated to fill two seats on Chipotle's board.

Despite the introduction of food giveaways, a loyalty program and new menu items like chorizo sausage and queso dip, many customers have stayed away. Chipotle executives have acknowledged neglecting basic operational details, like keeping restaurants clean and up-to-date, while they focused on food safety.

Chipotle shares, which had lost nearly 40% of their value in the past year through Monday, slipped 1.2% in Tuesday's regular session before rising sharply in after-hours trading on news of the CEO appointment.

"Other companies were working on doing a better job to close the gap between them and Chipotle through value offerings and improved quality," said Deutsche Bank analyst Brett Levy.

Mr. Niccol must also get along with Mr. Ells, who has been described by people who know him as a hands-on leader and a perfectionist. "I fully intend to have the new CEO be in charge," Mr. Ells had said when Chipotle reported earnings earlier this month.

Mr. Niccol has experience turning around a brand with perception problems regarding quality. He helped revive Taco Bell's image and financial performance after a disgruntled customer filed a lawsuit in 2011 alleging that its taco mixture was more filler than beef. The suit was withdrawn, but the publicity hurt Taco Bell's reputation and sales.

As marketing and innovation chief of Taco Bell at the time, Mr. Niccol repositioned the chain as a youthful lifestyle brand. The company hired interns to handle the brand's Twitter and Pinterest accounts, circulated a petition in favor of a taco emoji, created a taco lens on Snapchat and developed an ad showcasing photos of people posting Taco Bell food on Instagram.

Mr. Niccol aims to draw on that work at Chipotle, using social media to make the brand more youthful and culturally relevant, according to a person familiar with the matter.

Mr. Niccol is also known at Taco Bell for welcoming ideas from employees, including its restaurant workers. He has told investors that during a visit to a Taco Bell, he noticed employees using tortillas to make miniature wraps, which became the inspiration for Taco Bell's crunchwrap sliders.

Also under Mr. Niccol's watch, Taco Bell introduced breakfast, mobile ordering and payment, and hit products like Doritos Locos Tacos, Quesalupas and Nacho fries. The chain also opened "Cantina" restaurants in urban markets to compete directly for Chipotle customers with open kitchens serving small bites and alcoholic beverages.

Some of those ideas earned him a reputation as a risk taker. That could help Chipotle -- which is categorized as a fast-casual chain -- win back the 75% of former Chipotle customers who now favor fast-food brands, according to investment firm Cowen & Co.

In monthly surveys of 2,500 consumers, Cowen has found that ratings of Chipotle's food quality and trustworthiness have fallen since 2015.

One customer, George Nenni, who is a digital-marketing consultant for retail automotive dealers in Middletown, Ohio, ate at Chipotle twice a month before the chain's food-safety problems. Now he visits about once every two months.

Mr. Nenni, 52, said he can find healthier options elsewhere, including at the fast-food chains he frequents a few times a week. He said those restaurants are also more consistent than Chipotle. Sometimes, he said, Chipotle guacamole is so overwhipped it resembles green mayonnaise, the barbacoa meat is too fatty or the burritos are too stuffed for his liking.

"It's just really inconsistent," he said.

Write to Julie Jargon at julie.jargon@wsj.com

(END) Dow Jones Newswires

February 14, 2018 02:47 ET (07:47 GMT)

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