Tuesday, December 08, 2015

Chipotle Responds to a Food Safety Crisis

Chipotle finds itself facing a major crisis these days.   The company has experienced a major E. coli outbreak.  It began in the northwestern United States, and the firm closed a number of restaurants temporarily to address the situation.  However,  reports now indicate that some Boston College students may have gotten ill after eating at a Chipotle in Boston.   According to Boston.com, "City inspectors closed the Chipotle, located in Brighton near BC’s campus, “until further notice” after reporting three critical health violations following a visit Monday... Chipotle believes norovirus is to blame for the rash of illnesses that seemingly stem from the Cleveland Circle restaurant, but the Boston Public Health Commission says it’s too early to tell."

The Wall Street Journal asked several crisis management experts to assess Chipotle's response to the crisis.  Richard Levick commented,

"Long term, Chipotle will need to carefully examine its supply chain. Its 5% stock drop is likely due to the fact that this is the third instance of foodborne illness connected to Chipotle since August. That leaves the company more vulnerable to lawsuits and potential regulatory action. It also directly contradicts a brand built, at least in part, on the sourcing of fresh, organic, farm-sourced fare. Thus far, the supply chain has not been a major focus of the company’s communications. In the coming weeks, that may need to change."

Levick raises a crucial point. Product quality and safety crises become especially threatening to a company when they go to the heart of what a brand has chosen to stand for over many years. In fact, companies can be punished even more extremely by customers (and investors) when a crisis undermines the core of their competitive positioning. Chipotle has staked its reputation on the quality and freshness of its ingredients. Thus, the supply chain has been at the heart of their competitive positioning. Any substantial defect in that supply chain will have long-lasting repercussions. The company not only has to address the situation at the restaurants, but they will have to reassure customers that the supply chain indeed lives up to the reputation that has been cultivated over time. As a big fan of Chipotle, I hope they get it right! 

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