Chili's banking on baby back ribs

by Monica Watrous
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Chili's is introducing new flavor profiles for its baby back ribs.

DALLAS – A new steak promotion at Chili’s Grill & Bar failed to sizzle sales-wise in the recent quarter, contributing to a disappointing financial performance for parent company Brinker International Inc. For the third quarter ended March 23, Brinker net income was $57,502,000, equal to $1.01 per share on the common stock, down 12 percent from $65,427,000, or $1.04 per share, the year before. Revenues totaled $824,639,000, up 5.2 percent from $784,215,000. The increase was primarily attributable to the 103 formerly franchised Chili’s restaurants acquired in the first quarter.

“The third quarter was a tough quarter for Chili’s,” said Wyman Roberts, CEO and president, during an April 19 earnings call with financial analysts. “We did introduce our Sizzling Steak platform, which drove strong internal metrics and helped narrow our gap to the category during the quarter, but at the end of the day, it wasn’t enough to drive the incremental traffic we needed. Our takeaway is we have to be even more aggressive with our value proposition and the message and media to break through in this environment.”

During the quarter, comparable sales at Chili’s company-owned restaurants fell 4.1 percent.

“So what made this quarter so much tougher than expected?” Roberts said. “First, we thought the industry would actually improve overall, and it got softer, partly because of a tougher weather lap over last year and also because of the continued economic malaise that has created a drag on the industry.

“At the same time, QSR launched their latest round of pricing strategies with even stronger value offers that we believe had an impact on the category.”

The Sizzling Steak platform introduced during the quarter “offered a high-quality product with innovative presentations and flavors that drove significant preference at a price point of $11.99, but we needed to do more with our value proposition and messaging to drive incremental traffic,” Roberts said. “So now we’ve come to the market with an even more compelling offer: new flavor profiles on our world-famous baby back ribs along with fries, a salad and a dessert for just $10.99.”

 
Chili's offered a Sizzling Steak platform that fell flat in the quarter.

Four sauce options for Chili’s baby back ribs include original, Dr. Pepper, craft beer, and a new honey chipotle. The ribs are smoked in-house over pecan wood and slow-cooked at 212ºF, according to the company. As part of its marketing of the menu item, Chili’s is bringing back its famously catchy jingle in a new television commercial.

“This is just the first step as we continue to increase the intensity of our strategy into the new fiscal year,” Roberts said. “Our focus as we move toward fiscal 2017 is to invest back into the brand in several key areas to get us back to taking share, growing the business the right way and delivering results through sustainable top-line growth.

“First, we are recalibrating our value proposition as we evaluate how our 2-for-$20 program stands up against today’s competitive landscape. We are testing some aggressive options to deliver the most compelling value proposition that makes sense for our business.

 
Chili's plans on evaluating its 2-for-$20 program.

“Second, we will push even harder on culinary innovation as we continue to enhance our core equities and bring new products to the market that broaden our reach and appeal.

“Third, we know we have to shake up our marketing strategy to break through more effectively, so we are going to invest back into media more heavily and launch a whole new created campaign to reintroduce the brand to consumers.” 

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