Chipotle Mexican Grill, known for its organic and locally sourced ingredients, is in the throes of the worst crisis in its 22-year history. The company has been stuck in the turbulence of one food safety issue after another for six months, juggling public reassurances with quarterly earnings adjustments.
Now the burrito chain is working to win back customers and persuade shareholders so that its stock price can recover from a nauseating downturn.
Fortunately for Chipotle, other food companies have been in this position before, and their collective experience offers a step-by-step guide for how to respond to a food safety crisis. Industry and communications experts say Chipotle has smartly based parts of its response on proven strategies from past outbreaks but has fumbled on other parts.
Chipotle's problems begain in earnest last August when around 80 customers fell ill from the vomit-inducing norovirus after dining at its restaurant in Simi Valley, California. Just a month later, salmonella-infested tomatoes at 22 Chipotle restaurants in Minnesota sickened dozens more. From mid-October to early November, health officials identified 52 E. coli cases linked to Chipotle in nine states. Then, in December, at least 120 more customers fell ill in Boston after eating at a Chipotle in an unrelated norovirus outbreak.
Growing concerns about the company’s supply chain have dealt a blow to Chipotle's stock price, which dipped to $558.16 on Monday from a 52-week high of $758.61. Chipotle said it expects same-store sales to fall by 8 to 11 percent for the fourth quarter and will spend between $6 and $8 million to restock food at affected locations and conduct additional testing.
Focus on Customers
When a company faces a food safety outbreak, experts say, its executives must remain keenly focused on customers’ best interests if they hope to persuade them to remain loyal. Gene Grabowski, a crisis management specialist at kglobal, says too often higher-ups are distracted by the financial ramifications of a crisis and what it means to shareholders. They release as little information as possible, and that leads to public suspicion.
"To be in business in the 21st century is to be in crisis," Grabowski says. "In crisis, most companies are thinking about everything but the consumer."
Planning ahead for an outbreak can eliminate some of the initial panic among staff when one does occur, and it provides an actionable framework for moving forward. Jonathan Bernstein, president of Bernstein Crisis Management, tells his clients to develop a crisis communications and operational plan that staff regularly update and rehearse. The plan should include boilerplate language that can be quickly adapted for any potential issue.
Bernstein also says it’s critical for a company to show consumers that it is proactive in its management of an outbreak, and giving that impression starts with timely and transparent messages. “In the absence of communication, rumor and innuendo fill the gap,” Bernstein says. “All messaging needs to communicate compassion, confidence and competence.”
Chris Arnold, communications director at Chipotle, says they did have a crisis communication plan in place. The company readily posted information about the E. coli outbreak to a dedicated webpage, and it published open letters to customers in Seattle and Portland-area newspapers, where that outbreak was the worst.
When an outbreak occurs, Grabowski says it’s important for companies to take ownership from the very beginning. Bernstein agrees that this point is key: “You don’t wait for the government to require a response because the government isn’t responsible for your reputation,” he says.
Chipotle voluntarily shut down 43 restaurants in the Pacific Northwest after the first reports of E. coli in that region. And when reports of norovirus began to spread, Chipotle was quick to distinguish the incident as separate and unrelated to the E. coli outbreak. Grabowski says the company put too much emphasis on explaining that distinction and not enough on presenting solutions.
“When you’re explaining, you’re losing,” he says. “It defines your weakness as a company instead of talking about what they’re going to do to make sure it's never going to happen again.” He thinks the company should have moved faster to acknowledge the challenges it faces in consistently sourcing and testing fresh produce or preventing human illnesses such as norovirus from spreading in its restaurants and immediately announced changes that would move the public’s perception of the company forward.
‘Rip The Band-Aid Off’
No one knows the perils of waiting too long to respond better than Grabowski, who worked closely with Blue Bell Creameries CEO Paul Kruse to manage a listeria outbreak at three of the ice cream company’s manufacturing plants last summer. Blue Bell’s listeria woes caused three people to die and 10 to be hospitalized, and prompted a total recall of all products and a four-month production shutdown.
Grabowski now admits Blue Bell didn’t respond as quickly as it should have. The company initially pulled some products from store shelves and issued a series of limited recalls before finally admitting that the problem may have expanded to all of its products.
“The lesson learned there was: Close the entire operation down sooner,” he says. “Rip the Band-Aid off, do it all at once, don't lead to a drip, drip, drip of successive recalls if you can help it.”
Once a company is firmly in control of an outbreak, Grabowski and Bernstein say it’s important for staff to recognize the proper time for an apology.
“Apologies come naturally when you put the consumers first,” Grabowski says. “If the consumer is confused or inconvenienced in any way, then it’s time for an apology.”
After Chipotle’s norovirus outbreak, CEO Steve Ells apologized to consumers on NBC's "Today" show and promised Chipotle would become “the safest place to eat.”
The apology was an important gesture, says Bernstein, but he thinks Ells’ grandiose statement about becoming “the safest” restaurant was a misstep. Chipotle's press releases included careful language acknowledging it is never possible to eliminate all risks from the food supply, but he says the CEO’s comments were overly dramatic.
“They made a huge crisis-communications mistake by making the absolute statement — ‘We're going to be the safest place to eat,’” Bernstein says. “I'm sure their intent is to be reassuring, but it would be like the president saying, ‘We're going to prevent all terrorist attacks.’”
Hard Lessons To Swallow
The last component of a well-crafted foodborne illness corporate response is, of course, to follow through on promises to minimize the chance it will happen again. After Ells’ apology, Bernstein and Grabowski agree that Chipotle’s future success will surely be judged by how well it follows through on his promise.
Chipotle is now working with Seattle-based IEH Laboratories and Consulting Group to overhaul its food safety program. The restaurant chain has said it will implement an “industry-leading food safety plan” for its 64 ingredients over the next four months, featuring genetic and microbial tests of all fresh produce for its nearly 2,000 restaurants. A special webpage now describes Chipotle’s new food safety program.
It’s difficult for experts to predict how long the financial impacts of the outbreaks on the restaurant chain will linger. Blue Bell has just begun to slowly roll its products back out to markets throughout the U.S.
However, Andrew Alvarez, an IBISWorld research analyst who specializes in the food and beverage industry, points out that it took Taco Bell four quarters to financially recover from a 2006 E. coli outbreak traced to its green onions.
“If consumers were as forgiving for Taco Bell in that the sales were able to rebound within a year, consumers will probably have even more goodwill with Chipotle,” he says.
Though optimistic, Alvarez hesitates to say that Chipotle is fully in control of its own destiny. “I'm waiting to see if there are any more outbreaks,” he says.