BUSINESS

What Chipotle Needs To Do To Win Back Its Customers For Good

The CDC has ended its Chipotle investigation. Will customers come back?
Chipotle restaurant workers fill orders for customers on April 27, 2015, in Miami, Florida. The CDC announced Monday that its
Chipotle restaurant workers fill orders for customers on April 27, 2015, in Miami, Florida. The CDC announced Monday that its investigation into Chipotle's E.coli outbreaks was complete.

The Centers for Disease Control and Prevention announced Monday that it has wrapped up its probe of Chipotle’s E. coli outbreaks, declaring them to be over with no new illnesses reported to the agency since December.

The news was welcome by the Denver-based fast-casual chain, whose business sales were down some 30 percent as a result of the health crisis. Spokesman Chris Arnold told The Denver Post the company is “confident that the changes we have made mean that every item on our menu is delicious and safe.” The company’s stock price surged as a result of the CDC’s announcement.

Still, the source of the outbreaks remains unknown and, according to the CDC, will all but certainly stay that way as the customers who got ill had eaten a wide range of menu items.

"When a restaurant serves foods with several ingredients that are mixed or cooked together and then used in multiple menu items, it can be more difficult for epidemiologic studies to identity the specific ingredient that is contaminated," the CDC wrote.

So questions remain: Will the company recover in the eyes of consumers? And, with the Chipotle model of fresh, local and customized catching on across the industry, could similar outbreaks become more common?

Jayson Lusk is an agricultural economics professor at Oklahoma State University and the author of a number of books on the American food system, including 2013's The Food Police. The Huffington Post recently spoke with Lusk about how Chipotle has handled its food safety crisis -- and what it could mean for the industry going forward. 

Chipotle has obviously been having a really rough time. What do you think of their efforts to address this? Are they going about it the right way?

I have no inside information and don’t know everything they’re doing or considering doing, but it does appear they’ve taken some steps to address some of their issues. I think one of the challenges is that they still haven’t been able to determine what the source of their various outbreaks were in some cases. It’s a bit hard to be really proactive when you don’t know what the source of the problem is. They are having an employee day, speaking with all employees about it, and that makes sense. Addressing managerial issues about when employees are allowed to work or not work certainly makes sense. I know they’ve also talked about going to a more consolidated procurement system, where their produce goes to a central clearing house and is distributed out again. I think that’s an effort to improve food safety that makes sense too.

What I don’t know and one of the big questions getting asked a lot is to what extent their outbreaks have to do with their business model -- using only fresh products and trying to source some of their products locally -- making them more susceptible to this. We don’t know if it caused this or not, but I think there’s some reason to believe those features do slightly increase their risk of foodborne illness.

That doesn’t mean they need to move away from it, but if they continue to use those contractors, they have to ensure they meet the standards and stricter agreements on how the products are farmed and transported. Fresh is great too and normally it’s going to taste better but there are some trade-offs there: a greater chance of spoilage and contamination. That trade-off is a challenge.

A Chipotle Mexican Grill employee prepares food on Dec. 15, 2015, in Seattle. Though the CDC's Chipotle probe is over, i
A Chipotle Mexican Grill employee prepares food on Dec. 15, 2015, in Seattle. Though the CDC's Chipotle probe is over, it remains to be seen if the chain's customers return.

It seems more and more food companies will be dealing with that trade-off, as they are also incorporating more fresh and local foods. Should we be more concerned about further outbreaks?

It is a challenge when food companies attempt to be “natural” or “clean.” Almost everybody I’ve talked to in the food industry is facing consumer demand for these sorts of characteristics of their food, to remove ingredients people can’t pronounce, for example.

The challenge on the food safety front is that the reason a lot of those preservatives are added or processes used is to improve the shelf life and help with food safety. For marketing purposes, they want to be offering all these “natural,” “clean” or whatever the word we want to use is, but if they do, they have to reformulate the products and find natural substitutes that do as good of a job doing what they do. The challenge of that trend going forward will remain with us as long as this is part of the marketing mix.

This will incentivize companies to invest a little more [in food safety] and be a little more careful, and the ultimate beneficiaries of that are the consumers. Jayson Lusk, Oklahoma State University agricultural economics professor

So, Chipotle's brand has worked against them.

Their whole image is being clean, safe and taking all these steps to improve animal welfare and remove all these ingredients a lot of people perceive as being somewhat unsafe. In my own personal opinion, their marketing went too far in that direction, giving the image that GMOs are unsafe or that growth promoters in meat are unsafe. To imply that your product is safer because you’re not using them is one of their marketing strategies and the image they cultivated is based on this idea of safety and wholesomeness and what have you. The reality of foodborne illness presented such a contrast between the reality and the image they’d cultivated that it may have had a bigger effect on their business than another business with a different marketing strategy.

Several years ago, Taco Bell had a big salmonella outbreak. When I think of them, I think of fast and inexpensive, not healthy or ethical or anything like that. Its stock took a hit, but not nearly as big as Chipotle’s did. 

Other companies besides Taco Bell -- like Jack in the Box -- have had similar outbreaks. Are there lessons from their responses to those outbreaks that Chipotle should be heeding?

Every outbreak is unique and different, so it’s a bit hard to generalize given that there are so few high-profile observations like this one. There are, of course, research studies on the effects of foodborne outbreaks on businesses and one of the things we typically see is that if a food company has a recall, if it’s a publicly traded company the stock price will fall and typically recover some two to three months later to a level that might have been expected prior to the recall. Jack in the Box is an example of one that took a little longer because people actually died. But there are still Jack in the Boxes around. It’s still alive and well. It’s part of human nature. People tend to forget and forgive a little bit as long as it doesn’t happen again.

I think that has hurt Chipotle because it’s been a trickling out of a series of events that kept the news story alive and kept peoples’ attention. That has had a large effect. How they improve may well depend on whether they have anything like this happen again. In the case of Jack in the Box, it was a really bad one-time event.

Patrons of the Chipotle restaurant at 1600 California line up for lunch Jan. 6, 2015. The chain is closing all its restaurant
Patrons of the Chipotle restaurant at 1600 California line up for lunch Jan. 6, 2015. The chain is closing all its restaurants for several hours on Feb. 8 for a food safety meeting.

Will Chipotle's crisis cause the industry to make meaningful changes to how it approaches food safety?

One of the things the Chipotle example reveals is that companies have a huge financial stake in making sure they’re selling a safe product. They also have lots of regulations, both state and local and federal, to meet. I think at the end of the day, the biggest incentive for these companies is that they don’t want to be another Chipotle. But one of the challenges is that you don’t typically earn a premium for selling safe food. Consumers expect it. So investments in food safety are more of an insurance policy. You have to pay a premium on your car insurance so that if you have an accident, it can be paid back. If you spend this money on food safety, you may never get a premium on it, but you could prevent a big accident and a huge loss in the future.

But food companies are learning from each other. One example that’s been discussed in this process is giving employees paid sick leave. Before, they would say it’s a huge cost, so is it worth it? On the balance sheet, they may not have added in that a sick worker may contaminate the food and cause customers to get sick. So you can bet that now, for Chipotle and other food companies who are probably making that calculation, there may be another number on the cost-benefit side that wasn’t there before. Will every company make a move in that direction [to offer paid sick leave]? I don’t know, but it’s certainly more likely to happen.

Who do you think will emerge as a “winner” from all of this? Chipotle? Chipotle’s competitors? Consumers?

I think at the end of the day, the winners will hopefully be the food consumers. Whether Chipotle survives this or not, the lesson that they and their competitors will learn is that the consequences of a food safety crisis like this really impact the bottom line. This will incentivize companies to invest a little more and be a little more careful, and the ultimate beneficiaries of that are the consumers.

This interview has been edited for length and clarity.

Joseph Erbentraut covers promising innovations and challenges in the areas of food and water. In addition, Erbentraut explores the evolving ways Americans are identifying and defining themselves. Tips? Email joseph.erbentraut@huffingtonpost.com.

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