GUACA-COLI

MOVING FORWARD FROM THE E. COLI OUTBREAK

Victoria Herbst

 

Client: Chipotle

Date: March 9, 2016

Executive Summary

Chipotle Mexican Grill is a fast food chain restaurant known for their healthy, organic, and natural foods. They live by the motto of “Food to Fork” and “Food with Integrity” when describing their brand.

Following an outbreak of E. Coli in different locations across the United States, Chipotle Mexican Grill’s reputation has been significantly altered. It was estimated that about 500 people were infected with a strain of E. Coli that was linked back to contaminated food at Chipotle Mexican Grill.

The incidents caused Chipotle’s stock prices to dramatically decrease, their locations to be less frequently visited, and put them under the scrutiny of the public eye.

Chipotle took steps such as issuing a public apology, reevaluating food safety procedures, and offering promotions to help garner traffic and sales into their restaurant.

I believe that through targeting the Millennials, their employees, and their food suppliers and farmers they will be able to regain the trust of the general public and come out from this incident a stronger and more powerful business.

Chipotle will be able to accomplish this goal by continuing forward with an open communication, increase education, and show each one of their publics that they are important in every way.

Some threats of not accomplishing this goal would be continual decrease of profit for the company, allowing the competition to surpass Chipotle’s company, and potentially bankruptcy.

If and when Chipotle follows through by targeting their key publics, their success will be measured by focus groups, marketing audits, and financial benefit.

Client Information

Chipotle Mexican Grill is a chain restaurant dedicated to creating “Food With Integrity”. Steve Ells, a graduate from the Culinary Institute of America, founded the restaurant in 1993 with its first location in Denver, Colorado. Within one month of their opening, Chipotle was selling more than 1,000 burritos per day (http://www.fundable.com). As of May 2015, Chipotle Mexican Grill was ranked number 24 on Forbes Most Innovative Companies in the World. They have about 53,000 employees across 1,900 locations; 17 of which are locations outside of the United States.

Even 20 years later, Chipotle Mexican Grill has continued to be dedicated to their motto that “using high-quality raw ingredients, classic cooking techniques, and distinctive interior design, we brought features from the realm of fine dining to the world of quick-service restaurants,” (chipotle.com/company).

Since July 2015, there have been numerous reports of outbreaks of both the E. Coli virus and the norovirus being traced back to Chipotle Mexican Grill locations across the United States. From then until currently (March 2016), Chipotle Mexican Grill stock has decreased dramatically.

The major competitors of Chipotle Mexican Grill include Qdoba Mexican Grill, Moe’s Southwest Grill, Rubio’s Coastal Grill, Pancheros Mexican Grill, Freebird’s World Burrito, and Baja Fresh (investopedia.com).

 

SWOT analysis:

 

  • Strengths:
    • Chipotle is a well-recognized brand (especially in the U.S.)
    • They have a strong loyalty with their customers (especially with the younger generations)
    • They are known for having organic and naturally grown ingredients
    • Their food is high quality
    • Restaurants are owned by the company and therefore are not franchised
  • Weaknesses:
    • The items on the menu are of a higher price range
    • There are no drive-thrus
    • Limited menu choice
    • Gained a bad reputation for contamination of ingredients
  • Opportunities:
    • Expand their locations internationally
    • Expand their menu options (include more ingredients, offer breakfast, etc.)
    • Push their health conscious agenda to strengthen their brand image
  • Threats:
    • Mistrust from the public due to contamination of two viruses
    • Competitors using this scandal as leverage to topple Chipotle Mexican Grill

 

Problem Statement

The problem at hand is the damage to the reputation of Chipotle Mexican Grill following the outbreak of two viruses. This began during July 2015 and continued on until February 1, 2016 when the CDC concluded their investigation and announced that the Chipotle outbreak was over (fda.gov).

Throughout the eight-month period, it is estimated that around 500 people have gotten sick from different types of E. Coli strains that were found in Chipotle locations across the country (rt.com). The outbreak was originally mostly in Washington and Oregon, but contaminated food spread across other states as well including Kansas, North Dakota, Oklahoma, and Massachusetts.

This outbreak has created an issue with the public’s trust and the brand image of Chipotle Mexican Grill. Chipotle Mexican Grill prided themselves in having all natural, organic, and fresh ingredients. This has become compromised by the outbreaks of E. Coli in the recent months. This mistrust affects Chipotle’s brand image as well as their sales.

In response to the initial outbreak in Oregon and Washington, Chipotle Mexican Grill closed 43 locations in early November in order to take steps to ensure the safety of their consumers. They worked closely with health officials during this time to determine if it was appropriate to reopen these restaurants. On their website under “Food Safety”, Chipotle Mexican Grill has outlined the procedures they are taking in order to ensure that their food is “as safe as possible” (chipotle.com/foodsafety). Included in these procedures, Chipotle Mexican Grill has explained how they will do high resolution testing at their farms and central kitchens, handle their food at centralized locations, and double check/test all ingredients before being sent off. They are also ensuring that their employees do not come to work if they are sick as to reduce any chance of contamination. They also took an employee day where they shut down all restaurants to have a company-wide meeting about food safety procedures.

In addition to these safety procedures, Steve Ells released a statement on the Chipotle website, essentially issuing a public apology for the outbreaks (chipotle.com/founderletter). In it he owns up to the problem at hand, apologizes, and goes on to explain what they are doing to ensure that they have “looked at each of the ingredients, where they come from and how they can be made even safer,” (chipotle.com/founderletter). They also offered a promotion of a free burrito after texting a number to receive a coupon.

However many people think that it’s going to take more than free food to win people back.

From a financial standpoint, after their stock plummeted in November of 2015, it has been slowly increasing from its bottom during January 2016. The effectiveness of their efforts may have some impact, but the biggest thing is going to be time.

Case Studies

There have been incidents of E. Coli outbreaks in chain restaurants before Chipotle. In 2006 Taco Bell faced an E. Coli outbreak in Philadelphia. Similarly to Chipotle, Taco Bell voluntarily shut down all of its locations in the Philadelphia area in order to be investigated and improved. After health inspectors came in they removed green onions from all of their locations due to the contamination being traced to that ingredient. Their strategies were beneficial and though they struggled financially for a few months, they eventually got back on their feet (nbcnews.com).

There was also an incident of E. Coli contamination with Jimmy Johns in 2012. The CDC found a rare strain of E. Coli in the sprouts served by Jimmy Johns. However, Jimmy Johns never made any public statement or apology, and though Jimmy Johns is still in business, there were many lawsuits filed against them and countless complaints (foodsafetynews.com).

 

Best practices for crisis communication:

 

  • React quickly. Be the first ones to respond and acknowledge the situation. Do not let the media blow things out of control before you give your input. Also, by not responding quickly (or at all) it could look bad on your brand like you are trying to cover something up.
  • Give a clear, honest, and transparent answer. People respond to humility and want the truth of the matter. If you are honest and up-front people are more willing to give you the benefit of the doubt and will believe you when you say you are going to fix it.
  • Choose the most appropriate channels to communicate with your audience. Press releases may seem too formal for certain situations, and therefore social media might be the best option and vice versa. The vehicle of communication can be your ally when trying to send a message.
  • Assess the seriousness of the crisis and address anyone directly affected by the crisis first. The people that are directly affected by the crisis will either make or break you. They should be the number one priority when examining your stakeholders and who to reach out to and help.
  • Identify spokespersons. Find someone that people can trust to give a statement (if needed). It shows that the whole company is acknowledging the crisis and is using all their resources to help.

 

Recommendations

Publics to target:

Millennials and younger generations.

Millennials make up a large portion of Chipotle’s sales. The Millennial generation responds to the healthy aspect of Chipotle, and the fact that it is one step up from a typical fast food restaurant. Also, a lot of Millennials didn’t seem to be emotionally affected by the E. Coli outbreak. If Chipotle can keep the loyalty of Millennials they will be able to keep a steady source of sales while they continue to repair their image.

  • Strategies: Keep up the personable and relatable aspect of the brand. Continue to be down to earth and easy-going, without seeming like they don’t care.
  • Tactics: Stay on top of all social media platforms. Respond to tweets, Facebook comments, etc. but don’t be too pushy or needy. Be able to joke around and follow with trends. Stay relevant, but for the right reasons. This will help them continue to build trust through interaction.

 

Employees.

Continue educating them on proper procedures and the changes that are going to be made. They are primary stakeholders in the company, so if they feel happy and confident moving forward, they will portray that through interaction and word of mouth.

  • Strategies: Shift the employee’s mindset to positive in the company. Make them feel well prepared and confident in their jobs.
  • Tactics: Continue with business-wide training on food safety procedures. Be open to hearing employee’s thoughts and concerns and deal with them accordingly. Continually educate and train employees on all aspects of food and health safety.

 

Farmers/suppliers of the food.

They are a large part of the “Food to Fork” motto that Chipotle has held on to for such a long time. These ingredients come directly from them and so making them feel prepared and confident will help reduce risk of future contaminations.

  • Strategies: Keep an open communication about the investigation and findings from the health inspectors. Educate them on the new processes they are taking and the reasoning behind it. Make sure they feel confident in their abilities to produce ingredients and listen to their potential concerns.
  • Tactics: Have meetings with farmers and suppliers on a regular basis to ensure that everything is running smoothly. Aid them in upgrading any equipment they might need in order to ensure safety of the ingredients. Let them know how important they are by giving the public real life examples of some of the farmers and suppliers that work for Chipotle.

 

Measuring the effectiveness

After completing the steps above, do an audit that examines the differences in sales and attitudes. Hold focus groups across the country and see what the public opinion is and if it is has changed.

 

References

“Another Outbreak: 2nd Wave of E. Coli Illnesses at Chipotle Probed by Feds.” RT International. N.p., 24 Dec. 2015. Web. 08 Mar. 2016.

Chapman, Ben. “Notable E. Coli Outbreaks in U.S. Fast Food Restaurants.” Barfblog.com. N.p., 31 Dec. 15. Web. 6 Mar. 2016.

“Chipotle Startup Story | How Founder Steve Ells Re-Invented Fast Food.” Fundable. N.p., 20 Jan. 2014. Web. 08 Mar. 2016.

Ells, Steve. “Comprehensive Food Safety Plan.” Chipotle. N.p., n.d. Web. 08 Mar. 2016.

Filloon, Whitney. “Chipotle Has a Plan to Win Customers Back, But Will It Work?” Eater. N.p., 15 Jan. 2016. Web. 08 Mar. 2016.

Flynn, Dan. “No Comment From Jimmy John’s About E. Coli O26 Outbreak.” Food Safety News. N.p., 18 Feb. 2012. Web. 08 Mar. 2016.

“A FOCUS ON FOOD SAFETY.” Chipotle. N.p., n.d. Web. 08 Mar. 2016.

“Our Company.” Chipotle. N.p., n.d. Web. 08 Mar. 2016.

“Taco Bell Acts after E. Coli Outbreak.” Msnbc.com. N.p., 06 Dec. 2006. Web. 08 Mar. 2016.

“U.S. Food and Drug Administration.” FDA Investigates Multistate Outbreak of E. Coli O26 Infections Linked to Chipotle Mexican Grill Restaurants. N.p., 1 Feb. 2016. Web. 08 Mar. 2016.

Wahba, Phil. “Chipotle CEO Says E.coli Crisis Will Hurt Its Business Through 2016.” Fortune Chipotle CEO Says Ecoli Crisis Will Hurt Its Business Through 2016 Comments. N.p., 13 Jan. 2016. Web. 08 Mar. 2016.

“Who Are Chipotle’s (CMG) Main Competitors? | Investopedia.” Investopedia. N.p., 20 May 2015. Web. 08 Mar. 2016.

“The World’s Most Innovative Companies.” Forbes. Forbes Magazine, May 2015. Web. 08 Mar. 2016.

 

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