Chipotle’s Health Crisis Shows Fresh Food Comes at a Price

Chipotle

Chipotle is in crisis. For months, a series of health scares have sent its stock tumbling, stalled sales, and triggered a federal investigation. On Feb. 8, the company said, it will close all its restaurants so employees can learn about the gravity of its foodborne illness outbreak. This week, company executives appeared at an investor conference in Florida in a bid to soothe unnerved shareholders, if not customers, and acknowledged 2016 would be a “messy” year for earnings. It helped. Shares in the company, once a darling of Wall Street, rebounded more than 12 percent and appear to be holding steady

But investors, restaurant analysts, and food safety experts say Chipotle’s woes won’t disappear anytime soon. When it comes to the logistics of food safety, the company still has a lot to understand, and a lot to prove. As it turns out, when your business model is built on the premise of serving fresh food—often with a promise that it is ethically grown and sourced—your supply chain becomes much more complex. And more complexity means more risk

'The more complicated your supply chain is, the more opportunity you have to introduce problems.' Melinda Wilkins, Michigan State University

“The more complicated your supply chain is, the more opportunity you have to introduce problems,” says Melinda Wilkins, director of the online master of science in food safety at Michigan State University. “[Chipotle’s] food sourcing is a laudable effort—and it’s what customers want. But they’re probably walking a fine line between offering fresh, local ingredients and decentralized food preparation and the risk of introducing foodborne pathogens because it is such a complicated food chain

Outbreak s

In a testament to the fierce brand loyalty that Chipotle has fostered among customers, the first indications that there might be a food safety issue at its restaurants had little impact on share prices. In July, five people in the Seattle area contracted E. coli after eating at a local Chipotle. The cases drew little attention, and Chipotle shares closed at a record high of $757.77 on August 5—a mind-boggling increase from the company’s initial public offering price of $22 in 2006—and stayed high through October. At its peak, Chipotle was worth $24 billion

The joy was short-lived. In August, more than 200 customers and employees at a Chipotle in Simi Valley, California, contracted norovirus—the leading cause of illness from contaminated food in the US. (Last week, Chipotle announced that a federal grand jury in California had subpoenaed the chain, ordering it to produce documents related to the Simi Valley outbreak.) A salmonella outbreak in Minnesota sickened 64 people in August and September; tomatoes served at 22 Chipotle outlets in the area were blamed. In October and November, dozens of E. coli cases sprouted in Washington, New York, Maryland, Oregon, Ohio, Illinois, Kansas and Oklahoma. Then norovirus hit more than 140 Boston College students in Massachusetts, including the men’s basketball team