Chipotle has certainly had a rough few weeks. With news of at least another 80 people sickened (apparently from a norovirus this time) after eating at a Boston area Chipotle (on top of at least 52 people in six states from E. coli), I can’t help but think of Jack in the Box.
For those of you who don’t remember, in 1993 an E. Coli outbreak at Jack in the Box restaurants sickened more than 700 people, resulted in the deaths of four children, and brought the company to the brink of bankruptcy. The damage to its brand was so extensive that the chain atrophied, shrinking from a national chain to regional one in the West (it’s birthplace). So intense was the media coverage and public fear that it forever imprinted “Jack in the Box = E. Coli” on my then 7 year old mind. I still haven’t eaten at one, though I don’t often have the opportunity as there aren’t any near me that I know of.
Of course, there are a few differences, not least of which is the size and severity of the outbreak(s). For one, the public had never really heard of E. coli until the Jack in the Box outbreak. The novelty of the bacteria and lack of understanding by the public probably hurt Jack in the Box more. There have also been a number of high profile outbreaks since then, making the topic at least more familiar to consumers now. Importantly though, Jack in the Box is, or at least was at the time, just like any other fast food joint. Chipotle, on the other hand, pioneered the “fast casual” concept and markets itself to health conscious people (1000 calorie burrito aside).
Chipotle touts its use of free range, locally sourced, non-GMO, fresh ingredients. While everyone is concerned about contaminated food, I can’t help but think this may cause more harm to Chipotle’s reputation than your average fast food chain. The drop in its stock price bolsters that view. On October 13 its shares closed at $750.42 and today are around $550. That’s an impressive drop in about 2 months time.
In some ways, Chipotle is a victim of its own success. Chipotle took a new concept and branded it brilliantly. Rapid growth is difficult to manage with a commitment to locally sourced, non-GMO, etc. foods. It had to set up numerous local relationships with producers that met their label criteria. These producers tend to be fairly small as well. This led to supply chain issues earlier this year resulting in Chipotle’s carnitas being pulled from the menu in many of its locations because some suppliers were not complying with the company’s animal welfare standards. All of these requirements, though noble, make it difficult to grow rapidly without some things falling through the cracks. With suppliers providing only a few of Chipotle’s ingredients, and at more local levels, Chipotle has to monitor far more sources.
Though an outbreak of E. Coli linked to other fast food chains would hurt their sales, Jack in the Box is a testament to the fact that they can recover. The damage to most would be far less now that people have actually heard of E. Coli. Chipotle may have a tougher time of it though. I’m not suggesting it will fail. But it certainly is taking a hit. When you market yourself with the healthy food tags, you can’t expect to bounce back from an E. Coli outbreak as quickly as some of the less healthy, MSG soaked alternatives.
Perhaps they should add an E. Coli free tag to their advertising.