Chipotle's New Chief Is the Guy Who Brought You Nacho Fries

(Bloomberg) -- For years, the brass at Chipotle Mexican Grill Inc. knocked rivals' fast-food fare. It was overly processed, the rap went, with too many ingredients, none of them very fresh or healthy.

Now struggling Chipotle is turning for help to an industry crusader for the sort of fat-crammed, high-calorie items that have made the burrito chain shudder. The new chief executive officer will be Brian Niccol, who ran Taco Bell for three years and met sweet success courting crowds with indulgent dishes such as Doritos Locos Tacos and A.M. Crunch Wraps.

Investors including Bill Ackman's Pershing Square Capital Management applauded the announcement, sending Chipotle shares up as much as 14 percent on Wednesday -- the most intraday since 2014.

“Taco Bell is kind of edgy and forward thinking -- they're not an old stodgy-type brand,” said BTIG analyst Peter Saleh. With Niccol, Chipotle “has gotten a seasoned executive who's had a lot of success.”

Niccol, 43, will replace Steve Ells, 52, in a dramatic changing of the guard. Ells, who will remain chairman, founded Chipotle in 1993 as an alternative to traditional fast-food restaurants, building it into a company that stressed the wholesomeness of its ingredients and derided the kinds of offerings that populate Taco Bell menus.

As CEO of Yum! Brands Inc.'s Taco Bell division, Niccol was credited with helping turn around sales and speeding the introduction of technology. He began at that chain in 2011, working in marketing and product innovation before taking the top job in 2015. During his tenure, Taco Bell lured diners with limited-time offerings, recently generating buzz with its new Nacho Fries.

Taco Bell under Niccol also embraced digital ordering, one area where Chipotle has lagged. The company has had other problems, including suffering a string of sales dampening foodborne-illness crises spanning several years.

Niccol will start as Chipotle CEO on March 5, and will also join a board of directors that has been criticized in the past for being too insular.

Ells praised his replacement, saying that “his expertise in digital technologies, restaurant operations and branding make him a perfect fit for Chipotle as we seek to enhance our customer experience, drive sales growth and make our brand more relevant.” For his part, Niccol said he has “tremendous respect for the Chipotle brand and its powerful purpose.”

A spokesman for Pershing Square, Chipotle's biggest shareholder, called Niccol “the right leader to reinvigorate the company and help it achieve its enormous potential.” The firm held more than 10 percent of shares as of September.

Chipotle stock lost almost 40 percent of its value over the last 12 months, falling for five straight sessions after its fourth-quarter report showed it was still struggling to boost customer traffic. New dishes such as queso didn't have the desired effect.

‘Good Fit'

On Wednesday, the shares went as high as $287.71, while Yum fell as much as 1.9 percent to $76.323. Yum gained 14 percent in the last year through Tuesday's close -- partly powered by Taco Bell's strength.

Julie Felss Masino, Taco Bell's president for North America, and Liz Williams, head of the brand's international business, will replace Niccol in a co-CEO role, Yum said.

While Niccol is “a good fit” for Chipotle, “he's got some work to do,” BTIG's Saleh said. “Taco Bell is a predominantly franchised model with a drive-thru. Chipotle is a company-owned business model with no drive-thru. Chipotle is also a $12 check. Taco Bell is probably half that.”

A key factor will be how much room Niccol will be given to maneuver and make changes, said Bloomberg Intelligence analyst Michael Halen.

Niccol “has a great track record,” Halen said. “It will be critical that chairman and founder Steve Ells gives him the autonomy to succeed.”

To contact the reporters on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net, Craig Giammona in New York at cgiammona@bloomberg.net.

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Anne Reifenberg, Jonathan Roeder

©2018 Bloomberg L.P.