You can do everything correctly in a crisis, yet your brand still may suffer. On the other hand, the end game is just that—and it takes a while before most crises come to a close. Certainly Chipotle illustrates this.
[Update: Tues, December 8, 2015, 2pm ET. More bad news today for Chipotle as Boston College officials say 80 students who've reported to the college's health system with G.I. issues confirmed they ate at a Boston-area Chipotle over the weekend. The restaurant was shut Monday. All the students have been tested for E.coli and norovirus. Results are expected later this week. Chipotle shares were trading at $539, down more than $12, at 1:58 pm ET.]
The brand dealt quickly and transparently with an E. coli crisis that made the news during Halloween weekend. Out of an abundance of caution, the Denver-based burrito maker quickly and voluntarily closed 43 outlets after receiving word from federal and state authorities that diners had developed illnesses linked to E. coli in six restaurants (that figure later was confirmed to be nine and then 11). All 43 restaurants have reopened, yet the source of the E. coli outbreak remains a mystery.
In terms of PR, Chipotle has created a site where it provides answers to questions about the incident as well as press releases and general information about E. coli. Chipotle detailed the steps it has taken to insure its restaurants are clean, including hiring two firms to “help us identify opportunities to enhance food safety practices throughout our operations—from the farms that supply our food to our restaurants that prepare and serve it.”
Its point person, Chris Arnold, has been extremely responsive, including providing insight to PR News. Friday, the site was updated with the following: “The CDC has informed Chipotle that six additional cases have been reported in California, Illinois, Maryland, Ohio and Washington. Although one of the individuals from these newly identified cases has no known link to Chipotle, five individuals did report eating at Chipotle. An additional illness was identified in Pennsylvania, but the case is not connected with a Chipotle visit. These cases, while newly reported, are not new with exposures for all of the cases occurring between mid-October and early-November.”
Tomorrow, the chain’s co-CEO, chairman and founder, Steve Ells, is set to address the 2nd annual Bernstein Consumer Summit in New York City. The presentation will begin at 11:40 am ET and be webcast live at chipotle.com.
We don’t envy Ells tomorrow. Friday the company slashed its Q4 earnings estimates due to the E. coli outbreak. Sales will decline 8-11%, it said.
While shares had fallen since the crisis started, today they began the day dropping fast, opening at $516 after closing Friday at $561.20. One year ago Chipotle stock, a darling of Wall Street due to its return on investment and ability to grow, was trading at a high of nearly $760. As we post this, Chipotle shares were at $548.90.
Ells is expected to provide details about new guidelines the brand will impose on local suppliers to its nearly 1900 U.S.-based restaurants. The chain began procuring produce from local suppliers in 2008. But Arnold told media last week, given the changes that Ells is expected to detail tomorrow, “we expect that some of our current local produce partners may not meet those new requirements, so we are not sure what the program will look like when it comes back in season next spring.”
In addition, the site says, “Chipotle is aggressively taking actions to implement industry leading food safety and food handling practices in all of its restaurants and throughout its supply chain. Our enhanced food safety program will establish Chipotle at the forefront of food safety protocols in the restaurant industry.”
Of course, should you think Chipotle will survive the E. coli crisis, it’s a fine time to buy shares in the company.
Follow Seth Arenstein @skarenstein