The past year has not been kind to Chipotle. For several years after one of its first investors, McDonald’s, sold its stake in the company, Chipotle was often showcased as a leading example of why the Golden Arches, and the fast-food industry at large, has struggled in recent years. Concerns about the national food supply, and the desire to eat at a place that served both quality food and a commitment to corporate responsibility, have arguably made the round red and maroon logo with that eponymous chili pepper a new American icon.
So, when Chipotle removed pork carnitas from many of its locations’ menu because of some suppliers’ questionable animal welfare practices, Wall Street grumbled but its loyal fans were forgiving. Then the worst nightmare for any food company started: Norovirus and E. coli outbreaks hit stores here and there across the country, from the Pacific Northwest to New England. Critics can discuss the reasons until they are blue in the face, as the Los Angeles Times has done, but the damage will be long lasting. Sales have tanked, as disclosed in the company’s most recent filing submitted to the U.S. Securities and Exchange Commission.
In the meantime, the company is trying to lure customers back. Like you, I received a flier touting a free burrito at my nearby Chipotle. And like you, I am not sure if I will take the bait. After you read about the ordeal of the several hundred people who got sick from eating contaminated food at a Chipotle location, and what a Bloomberg writer has alleged is often less than transparent business practices, many past and potential customers may pass on the chain for a long, long time.
Surprisingly, Chipotle’s stock has not taken as sharp a dive as expected, but many analysts say sell in the wake of the company’s largest sales drop to date. And the fact that Chipotle has mailed out all these giveaways is a big no-no in the eyes of many Wall Street observers, as they create a bigger dent in the company’s overall performance.
But to many of the Chipotle’s stakeholders, the biggest offense committed by the company is that its sustainability ethos is not one embedded throughout its company’s offices and restaurants but instead, it now comes across as more of a thin veneer. Chipotle’s marketing campaigns trumpet “food with integrity” and a steadfast commitment to animal welfare. Critics of the company, however, will point out there is really no such thing as a “humane” slaughter. And when news outlets such as Buzzfeed pressed for specifics on how Chipotle defines “responsibly-sourced meat,” the company has often responded with platitudes and garbled PR-speak.
Chipotle’s emphasis on buying local has also hit plenty of snags. One outcome of the company’s ongoing food contamination crises is that it had to backtrack on its promise to source local ingredients. And while Chipotle’s executives say they are committed to grass-fed beef, critics have pointed out that most of it comes from Australia. American ranchers have largely complained that the company (and in fairness, its customers) just do not want to pay the premium for beef not raised on grain. Meanwhile, not only is there a chance that your Chipotle meal is not entirely raised locally, but it is also not cooked locally: Much of the meat used in the company’s burritos, tacos and salad bowls is braised by one of its largest suppliers, including OSI and Miniat Holdings, both of which are in Chicago. Cooking at your local Chipotle outlet is largely limited to heating plastic bags of meat in hot water and then shredding it by hand.
Recovery for Chipotle is possible, but the road ahead is long. One hope for the company is that when other restaurant chains endured similar crises, they in part bounced back because of consumers’ short memories. In this age of social media, however, any more contamination outbreaks — or revelations that Chipotle is not the sustainable and local model citizen it called itself for years — will mean that the company may not regain a business’s most important asset nowadays: trust.
Image credit: Wally Gobetz (Flickr)