Credit: Proshob/Wikimedia

Food scare leaves Chipotle looking queasy

E. coli outbreaks are a restaurant company's worst nightmare.

by Jack Torrance
Last Updated: 16 Mar 2016

There are no products more personal than food. It can lift our moods, lubricate difficult conversations and plays a big part in keeping us healthy – or making us fat. With shelter and water it’s one of the fundamental elements that keep our heart beating.

So for restaurants, trust is a crucially important commodity. You only need to look at Chipotle, the US-based Mexican fast food chain (which has a few stores in the UK and mainland Europe too) to see why. After a series of E. coli and Norovirus scares in it stores towards the end of last year it lost 45% of its market cap in less than three months.

Its latest figures published yesterday evening aren’t looking much healthier. Comparable sales were down a pretty hefty 26.1% in February. It dubiously described that as an ‘improvement’ on January’s disastrous decline of 36.7%, but whichever way you look at it things are looking decidedly sickly. After a fresh outbreak at one of its Boston restaurants, its sales were down 27.1% in the second week of March. Now it says it expects to post its first ever quarterly loss, which sent its shares down another couple of notches.

It’s particularly embarrassing for a company whose whole mantra is about sourcing better quality ingredients than its traditional fast food rivals. Winning back customers won’t be easy. The company says an ‘aggressive marketing campaign’ offering customers a free burrito helped sales to recover. But that can only go so far – who wants a free burrito that’s going to leave them glued to the toilet for half an hour?

Promotions won’t rebuild the trust Chipotle has lost. Instead it needs to focus on convincing people it has learned the lessons of the scandal and that there aren’t more outbreaks on the way. Hiring Jim Marsden, ‘one of nation’s foremost authorities on food safety’ will go some way in doing that. But unless he makes sweeping changes that do prevent further outbreaks then any advantage of doing so will be short-lived. Reports that it is considering rowing back on some previously announced changes like pathogen testing of certain ingredients won’t help.

With its tarnished reputation, legions of new competitors and old foes like McDonalds bouncing back with more upmarket burgers, fresher ingredients and even experimenting with table service, Chipotle could be bedridden for some time.

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