Building Up Leaders of Color
Black alumnae leaders recently came together for a fireside chat about their career journeys and the pitfalls and rewards of leadership.
Building Up Leaders of Color
On October 27, in a special event cosponsored by the Kilts Center for Marketing, Ann Mukherjee, AB ’87, MBA ’94, chairman and CEO of Pernod Ricard North America, and Brian Niccol, ’03, chairman and CEO of Chipotle, discussed how consumer behavior has changed during the pandemic. Their conversation, the second in Booth’s Road to Economic Recovery series on COVID-19, was moderated by Booth professor Jean-Pierre Dubé. The leaders drew from their personal experiences as the leaders of some of the world’s biggest companies to share expert insights on the topics of consumer behavior and how firms can adapt to survive and even thrive in this unprecedented time.
Randall Kroszner:
Welcome. I am delighted to welcome you to the second installment of Road to Economic Recovery, a series that we have at Chicago Booth on thinking about what is going to happen next, where is the economy going, and I think a focus on consumer behavior and consumption patterns is incredibly important for that. I speak to you from our beautiful new campus here in London. And when COVID permits, I look forward to working with you all here. As you can see, we're right next to St. Paul's Cathedral in the heart of the city of London. It's a beautiful space, and I look forward to seeing people both locally and internationally here very soon.
The Road to Economic Recovery is, as I said, a series that we are doing trying to think globally about what are the key elements for recovery. We're bringing in business and industry leaders, we're bringing in key policymakers, we're bringing in some of the key decision makers in the private sector, the CEOs that will be speaking with you tonight, as well as Booth experts to try to think about what are the keys to growth, what are the keys to making sure that we have a good, solid economic recovery globally.
And I'm really delighted here to be able to do this jointly with the Kilt Center for Marketing Research, because I think focusing on the data and focusing on what consumers are doing, could be doing, and hopefully will be doing, will be extremely important in thinking about both the macroeconomic and microeconomic issues.
So, we have just a spectacular, spectacular panel with us today. So we've got Ann Mukherjee, the CEO and chairman of Pernod Ricard in North America, and headquartered in France. So for the global institution with more than 20,000 employees worldwide. Ann joined the company relatively recently, just about a year ago and brings decades of marketing experience. She had been one of the key people at SC Johnson before coming to Pernod, and she'd been named marketer of the year by Brandweek, as well as one of the top 50 most influential CMOs by Forbes. And she is most distinguished by having two degrees from University of Chicago: an undergraduate degree in economics and religious theology, as well as an MBA in 1994.
We also are really lucky to have with us Brian Niccol, who is the CEO and chairman of Chipotle, fast casual restaurants in the US and throughout most of Europe. Chipotle employs more than 85,000 people, and Brian also joined Chipotle relatively recently, 2018, after being CEO of Taco Bell, the division of Yum! Brands. And he's received global honors from University of Chicago, from Forbes for the best employers for diversity, and Fortune magazine world's most admired companies. And Brian himself was named to Barron's world best CEOs lists recently. Brian alas has only one degree from University of Chicago, but he has the Chicago Booth degree and has that from 2003.
Moderating this discussion is a good friend and colleague at Chicago Booth, JP Dubé, who is the Sigmund Edelstone Professor of Marketing and the Charles Merrill Faculty Scholar, as well as the faculty director of the Kilt Center for Marketing. And he's a perfect person to moderate this because not only is he a spectacular scholar and has won all sorts of awards for scholarship, he's won awards for being a spectacular teacher, and he's also done a lot of work in the real world with Yahoo Microeconomics Research Group, a consultant for Amazon. So he understands the role of data and understands the role of the consumer in a very, very concrete, practical way, and linking that to theory.
So what I want to do is introduce a poll just before we begin, and then I'll hand it over to the group. So if we could put the poll up, that would be terrific. And so as you can see, since the pandemic, have you changed the way you shop for essentials? For example, do you shop online more than you did before? And so yes, somewhat; yes, a lot; no, I still shop about the same; or haven't thought about it. Because I think this would be interesting to get the audience’s view on this as the experts discuss this.
As you're answering the poll, I just want to remind you to please stick around after this hour-long discussion, because representatives of all of our MBA programs, the Executive MBA program that's based in Hong Kong, Chicago, and London, as well as the Full-Time and Evening Weekend programs that are based in Chicago, will be here to talk more about with offerings and other things and other programs that we do here at Booth.
So let’s have the—are we ready to have the results of the poll? And so we see, 45 percent: yes, somewhat. 36 percent: yes, a lot. Only 18 percent said no. And no surprise, everybody on this webinar has thought about it. It doesn't surprise me one bit. So let me turn it over to JP. And again, thank you so much for being with us in the audience and thanks to Ann, Brian, and JP for this really spectacular panel.
Jean-Pierre Dubé:
Great. Thanks so much, Randy. Folks, let me start off by just explaining a little bit why today's panel is going to focus on the impact of the pandemic, specifically on consumer behavior. This is a theme that's been inspired with some ongoing research by several of my Booth colleagues. So we have a bunch of researchers here at Booth who have been working already with the special Nielsen COVID database that's housed at the Kilts Center, and they've been using these data to try and document some major changes in consumer behavior, especially early in the pandemic. And I think there's a bunch of findings that are just rolling in, but we see a lot of striking changes in spending as well as in the frequency and nature of trips. So the poll we just saw is kind of consistent with the facts. So let me just spell out some of these facts that sort of set us up for our panel discussion.
My colleague faculty member Michael Weber, for example, and his coauthors, found that the largest single week increase in spending during the pandemic, and this may not come as a surprise, was actually the week of March 8. That was the week leading up to the national emergency declaration as consumers anticipated shortages and potential lockdowns. Average spending that week increased by about 18 percent compared with average spending in prior weeks. Remember, this is spending on consumer-packaged goods in grocery stores, drug stores, etc, convenience stores. According to Booth faculty member Oleg Urminsky and his coauthors, most of this growth came from food and beverage, which actually increased by 25 percent to 32 percent across those categories compared to the previous year.
Now, perhaps unsurprisingly, most of these early spending increases came from products that were largely storable in nature. So things like, for example, dried vegetables, which were up 80 percent, flour, pasta, household cleaners, they were up 50 to 60 percent, and liquor, which is a category we're going to be talking about very shortly, was up even early in the pandemic more than 20 percent compared to the same period in 2019.
Now, as we transitioned into April, this is where consumers are starting to accept their new normal, whatever that new normal may entail. By this point, many states had closed restaurants, they'd enacted other restrictions. Sadly we were in a position that we're about to find ourselves in soon here in the US once again. Actually we saw that consumer spending started to settle. So the increases in food and beverage settled around 13 percent throughout April, and that's compared to the same period in 2019. But consumers are concentrating their purchases. Remember, they're spending more, but concentrating them in fewer trips. So number of trips were down 10 percent. Spending per trip was up 30 percent. So you can say that the way we're shopping has fundamentally changed.
Now, Booth faculty member Chang-Tai Hsieh and his coauthors found that there was also a dramatic switch in how we pay. Consumers have switched away from cash transaction increasingly towards ATM and debit cards. And on the supply side, we actually see prices increasing fairly rapidly during this period, no doubt a response to shortages and other disruptions to the supply chain.
And finally, I want to point out that while our data at Kilts are largely consumer packaged goods in nature, these changes in behavior are hardly exclusive to the CPG sector. This is why we have Brian as an important part of our panel. And somewhat luckily for us, I suppose the timing was good. Chipotle just last week released some pretty striking news that their third quarter same-store sales are up over 8 percent compared to last year. This was largely catalyzed by digital. But that pivot hasn't come for free in that they also reported some important changes in costs as they pivot to that online environment.
So in light of these dramatic changes in demand for consumer brands, I want to repeat Randy's very nice introduction. We're really fortunate to have Ann Mukherjee and Brian Niccol, both of them CEOs of some of the US's most valuable consumer brands. And we're now going to use this panel as an opportunity to discuss how the pandemic has impacted consumer behavior and how businesses, in particular Brian's and Ann's businesses, have responded to these changes.
So with that, I'm going to start off with some of our questions. I'm going to direct my first question to Brian. Brian, focusing on consumers, can you talk about what consumer trends stood out to you in the early days of the pandemic and how did they affect your industry and/or your company?
Brian Niccol:
Yeah, sure. So first, thanks for having me be a part of this. And obviously it's been quite a last couple of months with consumer behavior changing dramatically. And one of the biggest changes we saw was obviously the quick shift to digital ordering in all age cohorts. So whether you're a 20 something, a 30 something, 40 something, 50 something, on and on, the shift to digital was swift and fast.
Fortunately, as you mentioned, in our most recent earnings release, we had put in a digital system throughout ’18 and ’19 where people could order in the app as well as through these third-party delivery partners. And that played out really nicely for us because prior to the COVID, 80 percent of our business was done in the restaurant. So 80 percent of our business people came in, ordered on the frontline, either sat in the dining room or took it away. 20 percent of the business was ordered off-premise through digital, with about call it less than 10 percent doing delivery.
Fast forward to about April and all of a sudden it became 90 percent digital, 10 percent in the dining room. And 50 percent of that digital business was delivery. So what you quickly saw was two things. People ordering off-premise. The other thing we saw is that individual lunch occasion disappeared, and it all became more group occasions at home. And the grab-and-go business, you know, we don't have a drive-through in a lot of our restaurants. Frankly, we're just starting to test what we call the digital drive-through at Chipotle, where you order ahead in the app, and then you don't have to get out of your car, and you just pick up your food. But for the most part, when you order ahead, you have to come into the restaurant, grab it off the shelf and go.
So our order ahead business took off, the delivery business took off in a big way, and then group sizes got bigger, because what happened is people were no longer going to school, no longer going to work. They were working from home or doing school from home. So, average ticket went up, you saw more burritos and bowls per transaction, and it skewed more towards dinner. Because in talking with consumers, it's not hard for them to make a sandwich, but by the time they get to dinner, they're fatigued. They already had to make breakfast and lunch and by the time they got to dinner, they were ready to have somebody else cook.
The other phenomenon was kind of what you mentioned. The week before everything shut down, there was a lot of pantry loading. So people were in the grocery stores buying lots of chicken from Costco, and eventually you got tired of cooking chicken as well. So, people's culinary capabilities are limited, and over time that really started to move more and more towards wanting foods delivered and then being able to provide those foods for group occasions, and then being able to provide a delivery experience that was timely and then the food was still delicious when they arrived. So the biggest shift we saw was, the early days, the pantry loading, the stopping of movement, and then your occasion switch from breakfast and lunch to more dinner solely. Those were kind of the big moves. And then obviously access through the digital channel was a big movement as well.
Jean-Pierre Dubé:
Thank you so much. Turning to Ann. Ann, Nielsen reported in May that in the US alcohol has been the fastest growing e-commerce department among CPG, and it's still growing. From your perspective, was the crisis good news or bad news for the demand of branded alcoholic beverages? You need to unmute. And folks, while we're unmuting, don't forget to submit your questions via the Q&A feature on Zoom.
Ann Mukherjee:
Sorry about that. Can you hear me now, JP? All right. So it's just like Brian said, it's been a learning journey. Hard to say if it was good or bad, but I think it created a lot of change. Going back to where you started, there was a huge amount of pantry loading that we saw in March. And what's interesting from a consumer behavior perspective is that before when people would buy alcohol and bring it home, they didn't consume it all, because they were going out, they were going to bars, they were going to restaurants. So it kind of sat around.
Well, the phenomena that we're seeing now is after people stocked up, they drank it all. So it explains why you see a continued very strong sales off-premise in alcohol because they have nowhere else to go to drink it. And we're seeing a lot of in-home consumption, cocktails—the fatigue that Brian was talking about by the end of the day, some people are turning to a cocktail to get through it.
And so what we're seeing is because of this, and people are buying more, the way they are buying is also shifting. And that surge that you're seeing in May, it continues. People are doing one of two things. They're either going to grocery stores or liquor stores, and they're running in, quick trips, they're buying big bottles and coming out, and they're buying the brands they trust, because they don't have a lot of time or money to waste.
And then the other thing that people have started adopting: digital, e-comm. This was an industry that was probably behind CPG when it came to e-commerce and digital. It is now leapfrogging in terms of that space. And we're seeing triple digit increases every single month.
Jean-Pierre Dubé:
Wow, those are some pretty striking numbers I got to say. I'm going to turn back to Brian for a moment here. Brian, according to a survey in June by McKinsey & Company, both the US and UK consumers alike reported that they expected to spend more on groceries, but less on quick-serve takeout and delivery. Now, given that Chipotle has seen a boom in their digital business, number one, do you think the McKinsey prediction panned out as they predicted? And I guess coupled with that, I'd like to hear your thoughts on whether or not consumers are willing to pay a price premium for delivered quick-serve restaurant food. And then of course anything related.
Brian Niccol:
Yeah, sure. Look, obviously more people have spent money on groceries then probably prior months, and it's to kind of what Ann's point is. They're actually consuming their food probably at a faster clip. Used to be the old pattern was you'd go to the grocery store on Sunday, you would eat Monday, Tuesday, and by Wednesday you're tired of eating what you bought. And by Thursday, you threw away some of the things that you bought earlier in the week. Friday, you go out, Saturday, you go out, and Sunday, repeat the process.
I think what's happening now is exactly what Ann just described, which is, what I'm actually consuming, the turkey, the chicken, the burgers, whatever it is I'm buying, and then I go back to the grocery store on Tuesday or Wednesday and restock up. Now with that said, what we're also seeing is people fatigue on cooking and just having what's in their kind of arsenal of culinary capabilities. So that's where I think a Chipotle steps in. And we're a little different than I would say most other QSRs in the standpoint that our food is more driven from the idea of food with integrity. So it's clean, wholesome, very customizable. So you know, you can eat keto, to you can create a 3,000 calorie burrito if you want to indulge and chase it with a Manhattan.
So the reality is what we have seen is that dinner occasion is still a place where people want to have a dining experience. Even if that dining experience is at home, they still want to have a dining experience. And the other occasions, like breakfast and lunch, I think you've seen more of an impact on the fact that people aren't going out. Like that breakfast occasion or coffee occasion was driven by your routine of getting your kids to school, or getting yourself to work, or yourself getting to school. That lunch occasion, maybe you ate by yourself, maybe you went with colleagues, maybe you did it on the go.
One of the things that was really interesting to me is when dining rooms started to open, I happened to be in Atlanta, Georgia, and I went into one of our restaurants to see what's going on in the dining room, and we actually had two gentlemen sitting in there eating by themselves. One happened to be a UPS driver and another person looked to be kind of a construction worker. And I went up to both the guys and I said, "Hey, I'm just curious what made you decide to eat in the restaurant today?" And they were like, "You know what? I was just so tired of eating in my car. I just wanted to sit down and eat my meal in a restaurant." And I think there's an element of people fatigue on this routine of having to prepare meals. So not surprising, you definitely saw groceries go up. I think where people overestimated was the impact on people's willingness to continue to still order food out, despite making more trips to grocery stores. And we've seen that play out in our business.
You mentioned, this last quarter, our comp was up over 8 percent, and on a two-year basis, we're up 20 percent, which is exactly where we were in January, February before COVID occurred. Now, we'll see what happens going forward, because before we even started this conversation, I'm starting to see states close dining rooms again, which will negatively impact that going-out occasion, as well as the weather getting cold, and offices remaining closed, and schools remaining closed. You need people to be mobile for part of the eating-out occasions to come back. But I think we'll continue to see strong digital occasions around group eating and that's what's going to probably carry the day until more normalcy returns to routines, even if that means the normalcy requires masks and social distancing.
Jean-Pierre Dubé:
That's fascinating. Ann, you've already kind of answered about the role of e-commerce in the branded alcoholic beverages category. So, I want to shift gears a little bit. That same McKinsey study I mentioned a moment ago also described supply chain issues that led to shortages of some of the leading consumer packaged goods brands. So an obvious consequence of this is that some consumers are going to show up at their preferred shopping outlet, and they're not going to find their preferred brands. So I'm curious to hear your thoughts on how these kinds of shortages, and in particular, forcing consumers to switch to their non-preferred brand, how do you see this impacting brand loyalty in the CPG sector?
Ann Mukherjee:
Yeah, I think it's a wake-up call. I think we as an industry, we as a country, we've been so over-invested on supply productivity that when this hit, it really showed the chinks in the system. We've all read about things about why people can't get more toilet paper. It's because people that created supply chain efficiencies to the point where when surges of demand happened, they were just not equipped to do so.
In my industry, in the alcohol industry, one of the things we have to remember is a lot of the alcohol that we sell is aged for years. And so when you see surges in demand, you don't have more aged liquid, right? So you can't just quickly increase the aging process, whether that be wines, whether that be bourbon, whether that be scotch. And so I think that's a real wake-up call around, what do we do with flexibility? Because to your point, JP, when you can't find the brand that you love on the shelf, it opens it up to you being kind of obsolete, because if someone goes to another brand, and they love it, you're done.
And so it's really, really important to understand that relationship with demand and supply, and what that means for consumer loyalty, because in this pandemic, we will see shifts, we will see new normals, and it's critical for brands to understand how to survive through this so they come out on the other side.
Jean-Pierre Dubé:
That's true. Okay. So there's a lot of interesting threats here that we're hearing. I've got some questions coming in from our audience, so I'm going to try and ask some—one of these questions. We have a question from Nathan Bradley, who is interested in how the stimulus money impacted patterns in consumer spending, the category levels in particular, like food versus alcohol, essentials versus entertainment, and how has lack of stimulus extension impacted spending? I'm going to direct this to both of our panelists. So, Brian and Ann.
Ann Mukherjee:
I'll start. I mean, look, the PPP, it was interesting in many ways. It did provide some very important disposable income that allowed people to continue their ways of living, from essentials to things that are not essentials. I think with the lack of stimulus now, we're all kind of bracing ourselves to see what that means, but it does bring up a big point around spend shifting. And let me give you an example. When you go out to a bar and you order an expensive glass of wine, or an expensive bottle of champagne, or some cognac, you could easily throw $100 on the table for a couple of glasses.
Now what consumers have figured out is, I can spend that same 100 bucks, and get a full bottle of that expensive cognac and have 20 glasses. So I think it's making people see value for money differently. And therefore, even though you might have a smaller pool of money, relative in that pool, the cost of what you are now doing on a per-occasion basis has gone down.
So we are seeing surges of very high-end alcohol growing double digit because I think people want...I think Brian said this. They either want to recreate the restaurant experience at home, or they want to recreate the bar experience at home. So we're seeing cocktails and high-end drinking. So it'll be interesting to see how that continues, in terms of if there's no more stimulus in the near future, people are reevaluating the value of what they are drinking and buying.
Brian Niccol:
Yeah. Agree with everything Ann is saying there. The one thing that I'll also bring up is we employ close to 100,000 people. And one of the things that's been interesting with the stimulus is people's willingness to ask for a leave of absence during this time. And so what's been interesting is even as some of the stimulus kicked in, we had a lot of people arguably have one of their best earnings months in history in the months of April and May, because companies like ours, we still went ahead and honored bonuses despite the fact that, frankly, March and April were disasters from a metrics standpoint. Fortunately, our company is one where we've got no debt and a really strong balance sheet. So we went ahead and still paid people bonuses in March and April. And then we also kicked in additional pay to keep people compensated for taking the extra effort to come into work.
You combine that with the extra stimulus money that was coming in, I believe the second quarter was one of the highest earning quarters in a lot of people's working history. Fast forward to where we are today, we're still honoring bonuses as if we're performing to plan because a lot of the reasons why people are missing a plan is driven by government intervention, not lack of performance by the restaurant team. But you are seeing the stimulus go away. And people I think are trying to evaluate whether or not the unemployment benefits and the benefits that they can get from not working are worth the trade-off of continuing to work.
And so one of the biggest challenges we're having right now is there is lots of scenarios where our restaurants are ready to hire more people. And the good news is we're getting applicant pool to hire more people. But it's really interesting. We have to make sure that we are doubling down on recruiting efforts during these times because people, just like Ann just analyzed the value equation on what they're buying, there's a new value equation on working. And we have to do everything we can to ensure we're providing the right benefits, the right compensation, the right culture, so that people see the value equation tilt toward the idea of working versus sitting on the sidelines for now. So, it's kind of been fascinating on two fronts: purchase behavior, as well as working behavior.
Jean-Pierre Dubé:
Thanks for that, folks. We have another question coming in from our audience. This one, again, sort of ties back to our earlier discussion about the shocks to loyalty and the impact in the long-term of those shocks. Kristen Horton asks, if you've seen, I guess I'm going to address this to both of you, "Have you seen any winning or unique tactics for maintaining loyalty either in the QSR industry or in the CPG industry for that matter?" And feel free to comment on your own strategies, not to mention those of a competitor.
Brian Niccol:
Go ahead, Ann.
Ann Mukherjee:
Okay.
Brian Niccol:
There's a lot to unpack in that.
Ann Mukherjee:
Yeah. These are really great questions. Look, I think right now, at least I'm going to speak to my industry. And as I mentioned before, because people don't have a lot of time when they're shopping—they're scared to be out, they're wearing masks—they're going back to the brands they trust. That's what we're seeing in our numbers. And so if you have big brands with high loyalty, now more than ever, you have to double down on reinforcing that loyalty with increased media spending, increased advertising. And it's not just the quantity, but the quality. Yes, we have a pandemic, but boy, do we have a whole bunch of other stuff going on. We've got social unrest, we've got a political year, we can go on. I think at this point I keep saying to my team, "The only thing that's left is locusts."
And so I think the thing that we have to remember is this is a time when people are not just looking to buy brands, they're looking to buy into brands. And Brian said something really important when he was talking about Chipotle, this notion of what your brand stands for, what it stands against. People are being more critical, they've got more time on their hands, they're being more critical about their brands and they're reevaluating. So this is a time where you have to move forward in a way to build loyalty and it may be different than how you've done it in the past.
Now, one example that I will leave you with is one of the brands that we have is Absolut, and Absolut has always been a brand of cultural provocation. We took on, right as the COVID hit, the notion of drinking responsibly also means consent. We talked about this notion of consent and alcohol, and what it means to sex responsibly. Now, in the midst of COVID and all the tensions that are going on, we have a huge campaign on Absolut about vote first, drink second, and this notion of voting responsibly. And so I think people are really looking to brands to say, "How are you going to show up during this time of great peril?"
Brian Niccol:
Yeah. Look, I would say from a loyalty standpoint, there's two things that we are focused on. One obviously is our customers. And then the second piece is our employees. And what we've spent a lot of time on is our culture and our values. Because we think that separates us. This idea of cultivating a better world through food with integrity really distinguishes our company from a lot of other restaurant companies, both for our employees, as well as our customers.
And I'll speak first to our customers. We just started a rewards program, and this is kind of to Ann's point, where people that believe and share the values in their brands, the loyalty is getting stronger through these times. And we've seen this in just our rewards program. Back in January, we were around eight million enrolled loyalty rewards people. Now we're at 17 million in a matter of six months. They want the additional engagement.
The engagement that we've had with them is not necessarily been what you would think is promotional engagement. It's frankly been a lot of engagement around the values and the things we're doing. It's been focused on how we're paying our employees through these times, how we're providing paid sick leave, what we're doing for our suppliers, the local farmer, the local dairyman. What are we doing to support the entire system that makes your delicious burrito? And that has been hugely powerful with each of our customers.
It's also been very powerful for our employees. Our employees feel very proud, and they've been deemed essential workers to provide food. And so for them to know that by them showing up to work, following the protocols around wellness checks, and masking up, and social distancing, and everything else that's been involved with food safety and wellness, it gives them a level of pride to know that, you know what? If they don't show up, that dairy farmer goes out of business, because they are turning around and providing their cheese onto bowls for people. Same thing goes with the produce folks in the Central Valley of California, or the avocado farmer, or the rancher.
So, the thing that's been really powerful for us around this time has been, obviously we had to give people the access that they wanted, and we opened the doors to delivery, and so on and so forth. But I really think the fact that we've been consistent in our decision-making around our values and the culture that we want to create has created more loyalty, more pride in our employees, and has created more engagement, conviction in our customers.
And just most recently, we just launched this program called Foodprint, where when you order in our app, while you're ordering, it shows you, by choosing Chipotle's food and the supply chain that we support all the way back to the farmer, your implications on water, soil, regenerative farming, carbon; relative to conventional approaches to the supply chain. And the response has been really, really powerful. And we just started this, and I just think this is the time where your values really, really define your company I think not just for today, but the loyalty that you'll get from your customer and your employees in the future.
Jean-Pierre Dubé:
That was really fascinating. So picking up on that again, you just gave us a really interesting example of one specific tactic you've taken to respond to the changes in behavior with your online app. Jenny Welch in our audience is wondering if you and Ann would mind sharing some other examples of how you've pivoted branding and/or promotions to account for shifts in consumer behavior. And I think the audience is a little hungry for more specific examples like the ones you just gave.
Ann Mukherjee:
You want to start, Brian?
Brian Niccol:
Yeah, go ahead. You want me to go, Ann?
Ann Mukherjee:
No, go ahead. Yeah.
Brian Niccol:
Okay. Yeah. Look, it's been really one of those opportunities where you want to be...We needed to be specific on what are the decisions we're making to keep people safe. So we actually spent a lot of time talking about the fact that we've had a lot of these food safety and wellness protocols in place. Frankly, we never had a reason to talk about the air filtration system that we use at Chipotle. But it's pretty meaningful, and now it made sense to share with people that we put in air filtration systems in all our restaurants that kill just about every bug that's admitted in the air when you go into our restrooms or when you come into the dining room.
We've always had hand sanitizing stations in the dining room. We never talked about it, we just had it there. It just presented the opportunity for us to talk about what are all the things we're doing from a food safety standpoint, as well as a wellness program. We've been doing wellness checks at Chipotle for now two or three years. We instituted a zero tolerance policy on it where unfortunately an employee would lose their job if they did not do a wellness check before they started a shift. And this wellness check was basically to ensure only healthy employees were working.
Fast forward to where we are today, the fact that we were already doing paid sick leave and wellness checks, and we have nurses on call for our employees that don't pass the wellness check to talk, we weren't talking about it. Now we are talking about it, and it's relevant to talk about. It's those types of things that I think have been really powerful to share both with our employees, to remind them that we do it differently and we were kind of on the front end of this, and then with our customers as they deal with the COVID situation.
And obviously on the food front, the other thing that we learned throughout this time was people wanted to know that their food was fresh and that it was also treated correctly. The idea of getting whole nutritious food in a time where you're worried about getting sick is hugely important. And so the ability for us to talk about how our supply chain is different, how we believe that we're changing the future of food, and the simple idea of, we believe if you change the future of food, we can change the future. And talking from that standpoint with people has really even more resonance than it did before I think, and it really differentiates our brand.
So as you think about specifics, it's little things too. For our digital business, we weren't sealing the bag prior to COVID. You would just pick up your rope handle bag and go. A little thing like putting a sticker so that you can now create a tamper of it and seal on your off-premise bag went a long way.
So, it's little things like that, all the way to the Foodprint initiative we just launched, to also talking about the things that you're actually doing in your restaurant that frankly before, I'm not sure I would have had a big audience to hear our air filtration story at Chipotle. So here we are where I think behaviors and interests have just changed and it presents opportunities for you to, I think, lean into things that in our case we were already doing, and with COVID, we probably elevated it just to another level.
Ann Mukherjee:
Yeah. The thing I would add is look, as CEOs, we always have to balance our company values, what our brands stand for. Brian talked about a lot of amazing things that they're doing as a company that of course translates into Chipotle, because it's the brand. When I've got 200 brands, and I'm a house of brands, I have to really step back and think about those same things that Brian talked about, and what does it mean for us here at Pernod Ricard? And I think for us, this notion of, and we've coined it as we not only have a duty of return on investment, we now have a duty on return on responsibility, and I'll give you two examples.
At the onset of COVID, I still remember the date, March 16, I got this note from my team. We had the ability across our two manufacturing facilities in our three distilleries to immediately convert one of our shifts in all of those places to hand sanitizers. We contacted the task force and Peter Navarro, and within three days, we cleared three different government agencies to get approval and we were producing within two days after that. We have since then provided hand sanitizers free to the government through FEMA for first responders across all major cities, and we continue to do so.
The other thing that we looked at is kind of what's been our responsibility in this time of social unrest. And there's a huge amount of social hate on social media, and we realized there was a boycott that was asked of us, and the big question we asked to Pernod Ricard, we're a company that values conviviality, people coming together socially. And here we are buying advertising that a percentage of that advertising is based on algorithms based on social hate.
So we invested and went to the industry and said, "You know what, let's bring crowdsourcing to stop social hate on social media platforms. What if we created an app that allowed consumers to report hate and created an accountability for social media platforms to take it down?" And this has turned into a huge industry initiative that we just launched with partnership with Salesforce and WPP, and endorsed by the A&A, and GARM, which is the Global Alliance for Responsible Media. And we're trying to bring an understanding that the social media space is just like the environmental space. You have to keep it healthy, especially now when we are forced to be physically distant, but we need to be socially connected.
So, Brian talked about it. There are so many things that you normally would never think of, that now you have receptivity from your consumers, from the industry, from your employees, from the government. Now is really a time for leaders to step up, and it's more than business. It is personal, and we have to understand what those values mean, and we have to act on them.
Jean-Pierre Dubé:
Well, these are all great examples of ways you're sort of doing quick-fire response to a changing consumer. One of our audience members, Eric Belcher asks a very Chicago Booth–like question about data. In particular, he's interested in how your information gathering and decision-making cycles have evolved or changed. And in particular, to what extent you're still relying on sort of more traditional monthly kinds of data feeds as opposed to more immediate signals, and especially vis-a-vis the consumer.
Ann Mukherjee:
Brian, you want to go first? Then I'll follow.
Brian Niccol:
Yeah, sure. I'll go first on this one. I mean, look, I'll tell you, the pace of decision-making had to change, because things were changing so fast and we went from, we usually have a weekly executive team meeting, to twice-daily executive team meeting. And so we were meeting every morning and every afternoon, because what started out at the beginning of the day was different by the end of the day, and we needed to make decisions for how we were going to open our restaurants the next morning.
So, one of the things I've asked our team is to figure out how do we keep that streamlined approach that the data was coming in fast. We took complex issues and data and boiled it down to the decision that needed to be made on a twice daily basis. And one of the things that we tried to figure out is how do we keep that approach without burning people out? Because you can't operate in crisis all the time. It's just not healthy, and eventually you'll start making bad decisions as well.
But what I will tell you is, look, one of the things that's great in today's world is the data is fast and available. Your ability to then process and synthesize that information is what's important so that you can make decisions that people can actually act on. And in our case, ultimately every decision we need a person to implement that decision. And so when you think about consumer behavior, we're thinking about how do we get our employees to adopt the new information and be able to put it into action tomorrow morning.
So that was a very new environment, as opposed to, we usually take a disciplined stage-gate approach where we'll go put it in a restaurant, we'll see the behaviors for a week or two, we learn from it, then we decided, "Okay. We'll go put it into 10 restaurants." After we see it in 10 restaurants, then we'll roll it out to a patch—which a patch is like 40, 50 restaurants—and then you move it into the system. This was, "Okay. It's Monday. We need to make a decision for how we're going to handle all the 2,700 restaurants Tuesday morning." And that's just the nature of the business.
Look, in some of these things too, I think clever things come out of it. When there was the coin shortage, that's still going on right now, one of our folks had the idea of creating a round-up for change program, for real change. And so we're still doing this. Like when you go into our website right now, you can round up the change for a cause. And in this case, it's schools, to get them supplies. A while ago, it was for the National Urban League, before that it was for the Thurgood Marshall program. But I thought it was clever that there was a way for us to take a problem, which was the coin shortage, and turn it into a positive where we could now raise money for causes that we think could make a positive social impact in the world. These were the types of things where they would come up on a Tuesday and by Friday you'd have it implemented so that it could be in everybody's system by Monday.
So, on the one hand, I love the action, I love the ability to get the data, make the decision, and let's go. On the other hand, you would prefer to be in more of a disciplined environment where you can be learning through the journey as opposed to everything is learned in real time. But it's powerful. It's very powerful to have the right people around the table, at the right time, with the right information, so that you make decisions and take action. And I think that's part of the reason why we as a company have fared fairly well through kind of the ups and downs of all this.
Ann Mukherjee:
Yeah. Then I'll build a couple of points. I don't mean to speak for Brian, but I'm going to in a sec. I think the reason both his company and our company are doing well is because they're being led by two University of Chicago Booth grads. Honestly. I think our training around, and Brian said it really well, if as a leader you can't take data and make it actionable, and you have to make sure that data doesn't overwhelm an organization to the point of collapse, and it could. Data's a powerful force, and if you don't harness its energy, it could absolutely debilitate you.
And like Brian, things that were yearly planning processes, we've now gone to quarterly. Things that used to be quarterly are now monthly. Things that were monthly are now weekly. Things that were weekly are now daily. That's the nature of managing through crisis. And like Brian's team, my executive team meets multiple times a week. We used to meet every other week, now we meet multiple times a week. And it's everything from protect your employees. We've got vineyards out in California and there's fires, forget COVID. I mean, there is a different crisis going on at different times. I have employees, people of color that are walking into accounts, being discriminated against. I've got to protect them.
The myriad of things that are hitting us and the myriad of types of data that you have to understand, and one of the things that we've tried to do is this notion that I talk about, about advancing through ambiguity, and it's the intersection of what you can control and what matters. And in a crisis, you have to understand the data that matters and the data that you can control, because to Brian's point, you got to be actionable against it. So this isn't about analysis by paralysis. It's about being even more discerning about the data that you need and connecting it in a way so it can be operationalized for action.
Brian Niccol:
Yeah. Well said, Ann.
Jean-Pierre Dubé:
Sorry. While we're on this topic of sort of what you learn and how you respond, we do have an anonymous attendee has asked the question, "Now that we're about to enter the lockdown, Illinois is set to shut down restaurants on-premise dining indoors tomorrow, what would you describe is the key thing you've learned so far that will be critical as we enter another lockdown phase?"
Brian Niccol:
Yeah. Look, I would tell you, regardless of the actions that take place, at the end of the day, corporations are people. And so what has to happen is you have to define the reality, be pragmatic on the issues at hand, but I think we still have to be hopeful. And I think, I wish, I don't just think, I wish, there would be more optimism.
Even though you have a setback, like what's happening in Illinois, it's a setback. This will pass, and we will deal with the issue at hand. We'll deal with it in a way that is smart, because it will be good for our employee, it'll be good for the customer, and it'll be good for the community. If we all believe that we're going to do the right thing for each other, we'll get through it, and we'll get through it faster, actually, if we trust and believe in doing the right thing.
So, I just so badly wish that the negative news that we all have to deal with could be positioned in a way where it's like, "Look, these are challenges.” And a lot of things," Ann just mentioned, right? It's wildfires, hurricanes, social unrest, social injustice, coin shortages, COVID, I mean, it's enough to make you curl up in a ball and cry, right? And just be like, "Oh, where are the frogs falling from the sky?" Right? That's all we're missing.
But I tend to go the other way, which is, "You know what? These are all temporary issues. There is no reason why we can't navigate through it." And in the end, I believe everybody wakes up in the morning wanting to do the right thing, wanting to make a positive difference, wanting to, frankly, be a part of something bigger than just themselves. And I think the more we can focus on doing the right thing in the moment, recognizing that the reason why we're doing the right thing in the moment is because there's a better future, there's optimism on what can happen next. That's the approach I take. And I think it's critical that people know, "Yeah, of course. We got to deal with what we have to deal with that's in front of us, but we have to do it in a way where we're doing it the right way so that in the future we'll be better."
Ann Mukherjee:
Let me provide some evidence to what Brian is saying, because I couldn't agree with him more. In our industry, we watch consumer behavior very closely. And what we're seeing is that holidays and celebrations, the amount of spikes that we're seeing in our business during those times is really high. Gift-giving, really high. People being stuck, being locked down, they are still finding ways to connect and celebrate the human spirit. And it's not going away. If we go back and look at history, past 500, whatever years of history, human beings are resilient. We will overcome. And even during the crisis, we are finding human beings, not just surviving, but thriving. And so they're doing it differently, so we as business people have to adjust to it, but it's still happening. And I believe with what Brian is saying, there is hope, and there is good to come from this.
Jean-Pierre Dubé:
Well, that makes a really nice segue here. We've gotten a whole bunch of takeaways on what you've learned and we've had several people in the audience ask questions that are a little more long-term focused. So Paul Bastian, and Dasher Shaw, I'm going to combine your questions, and I think there are quite a few that were of the same spirit.
Now that we've had a chance to learn how the consumer has changed in response to the pandemic, I guess there are a lot of folks who are wondering how many of these changes do we think will be permanent? Maybe we're a little bit of a crystal ball here about when a vaccine would ever be in sight and more importantly distributed and used. But as we get in the eventual post-pandemic era, what do you think will be the permanent changes because of this and which things that you've done do you foresee as being permanent in your business?
Brian Niccol:
I'll let Ann go first. I've been going first the last couple of times.
Ann Mukherjee:
Okay. Well—
Brian Niccol:
One thing I do hope stays permanent is people keep washing their hands, but that's just me. Okay? Over to you, Ann.
Ann Mukherjee:
I agree. I think, look, we're going to be reevaluating a lot of things. I think the way we live is going to get reevaluated. Just from a business standpoint, I think people are reevaluating, "Do I need to get on a plane every single time I need to do a meeting?" I think we're finding that virtually we're getting a lot more done than we thought we ever could. I don't think can do everything virtually coming out of the pandemic, I think people need to connect and feel each other, but I do think how we think about travel, how we think about how to get work done, how we employ people, where we employ them from, where they work from, I think is going to be a huge area that I think people will want to figure out.
All the way down to our industry, I think people how they're engaging with our brands and our products, and in-home consumption, and this notion of e-commerce. I don't know about you all, but if you go buy alcohol and spirits in grocery stores or liquor stores, and you got to lug that stuff home, that's fricking heavy. And if you're a woman, you're like, "What the?" So this notion of the convenience that we're seeing, and how convenience will redefine how consumers and shoppers engage with how they do shopping, how they go out and celebrate, I think all of those things will be reevaluated.
And I think finally, I think values are going to get reevaluated. I think people will look at companies and brands in a whole new way. I think people will look at them in terms of what values do you stand for? Whether it be how you treat your employees, how you treat the environment, how you treat the planet. I just think this is going to...There's been a bit of an enlightenment that's been going on, and it's going to manifest in people asking different questions coming out of COVID. So if we think we needed to be agile during COVID, I think we're going to have to be even more super agile coming out of COVID. Over to you, Brian.
Brian Niccol:
Yeah. Look, maybe this is because Ann and I both went to Chicago, we like to support each other's points. But I totally agree with what she's saying. I think the reality is a lot of things that have been considered necessary we've discovered are not necessary. And the thing that I value in this is hopefully that allows us more time to spend on things that actually are necessary. And I totally agree with Ann, businesses are not going to remain totally virtual, because at the end of the day, to create a culture, to develop people, and to frankly use those relationships to get things done, you need to be person to person. It's just who we are, it's how we get to build trust in the work that we do, both within our company and with other companies.
Now with that said, I think we've learned that does a lot of the trips were deemed necessary really necessary? And I think what we've discovered is no, you can do a lot of things virtual that allow you more time, frankly, because you're not spending time commuting to and from things, to be able to stay focused on things that matter. And I think over and over again what this just comes back to is if you've got clarity on culture, clarity on values, you can make decisions, and you'll figure out how to navigate whatever unexpected thing comes.
I got asked this question at our earnings call the other day, they're like, "Well, what do you think are the tailwinds you can take advantage of going forward?" And I said, "Well, the reality is, I'm sure there's going to be some unexpected headwinds."
So one thing, and I think if you were to ask Ann this question or me, I know for sure is, I don't know what's going to happen six months from now. That much I know for sure. What I do know though is I've got great people, with a great culture, with the right values to take whatever information comes at us, process it down to the thing to make a decision consistent with what we believe is right for the communities that we operate in and for our business. And if we've got that type of person on the ground making those decisions, I'm confident we're going to continue to make good ones. And it comes back to you got to have great people, you got to have a great culture, and you got to have people that aren't afraid to make decisions, and those are the businesses that will win.
Jean-Pierre Dubé:
Well, thank you both very much. I just want to recap that last point, because I think that's where a lot of our audience is looking towards as the long-term. What I took away from your closing remarks is that live interactions are still going to be important. We don't see the world moving to a fully digital world, but people's expectations have been changed, and that's where things may be permanent. And I took away two kinds of expectations from the consumer in particular.
The first one will be expectations about the convenience and how we shop, that's been changed a lot. And some of the ways we've made shopping more convenient sound like they will stick. And the second thing I heard both of you talk about are people's expectations from the brand, and as per Brian's comments, the company itself, and in particular, the events of the crisis have really generated a surge in interest in what our brands and what our companies stand for. So I think this gives a lot for our audience to think about.
So I think we're at the hour here, we've run out of time. So I want to really thank both of you so much for your candid comments and your deep discussion, especially your references to data and our Booth tradition of being evidence-based. I totally agree with both of you that I can't imagine how a company could succeed like both of your own companies without having that Booth pedigree. So thank you all very much. With that, I'm going to turn the floor over to Randy Kroszner again.
Ann Mukherjee:
Thank you, JP.
Brian Niccol:
Yeah, thank you.
Randall Kroszner:
All right. I'm back. And so that was really, really spectacular. I learned an enormous amount. I really liked, well, I'm not going recap the whole thing, but just the idea, Brian, for example, of how you turned a challenge into an opportunity, because I think that's extremely important. Because you can, as you said, it can be raining frogs, it can be raining snakes and whatever, and so it seems like all these things are negatives, but you can turn a negative into a positive. And that was a really great example of how you could do that in thinking about the coin shortage, but then solving that particular problem and making something positive out of it.
And then Ann, you gave such a great summary of what I think is special about Booth and Booth leadership, because I think the way that you said it is what leaders do is they take data, they harness it, and they make it actionable. And that's exactly what we try to teach here at Booth, is about that. And I think both you and Brian have really illustrated that, that in these challenging times, you gather data, you don't drown in it, and you have a framework to be able to ask the right questions, and then be able to make it actionable, to make those decisions on how do I deal with reopening or not reopening? How do I deal with a new outbreak? How do I deal with a new regulation?
So I think that was just really great. And it's also a great way, and thank you very much, JP, for doing a spectacular job of getting the best out of the best and also working the questions. But it's also a great intro to what we're going to do next. For those of you who are interested in our programs, the Executive MBA in Hong Kong, London, Chicago, as well as our Full-Time, Evening, Weekend, program in Chicago, we are going to be having people from our admissions offices online to be able to talk with you about that. So please stay on for that and then stay tuned for the next installment of Road to Economic Recovery. Thanks.
Ann Mukherjee:
Thank you.
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