• by Karlene Lukovitz  @KLmarketdaily, November 5, 2015

Chipotle Mexican Grill — which has spurred its rapid growth in part through innovative marketing campaigns attacking the ingredients and processes of large food companies and traditional fast-food chains — now finds itself facing a PR crisis and heightened attacks from competitors, amid an E. coli outbreak that appears to be tied to some of its restaurants. This is the third instance of food-borne illnesses associated with Chipotle units since August. 

As of Wednesday, Nov. 4, health officials were reporting that 39 people had been sickened by E. coli (no deaths), and that most had eaten at one of eight Chipotle restaurants in the Seattle and Portland areas in recent weeks. 

Chipotle has reacted swiftly. After being alerted to the situation by health officials over the weekend (Oct. 31-Nov. 1), Chipotle voluntarily closed not just the eight units, but 43 restaurants in Oregon and Washington, out of what its co-CEO Steve Ells termed "an abundance of caution."

Since then, Chipotle has cooperated closely with state and federal health officials as they rush to identify the origins of the E. coli O26 strain implicated in this outbreak (a strain that generally causes less severe illness than the one that killed four children who ate under-cooked hamburgers at Jack in the Box in the ‘90s, according to Reuters).

Chipotle said that it has also been deep-cleaning the closed units, replacing all the food, conducting environmental tests in its restaurants and distribution centers, and batch-testing some ingredients. In addition, it has hired two food safety consultant firms to "assess and improve upon" its "already high standards for food safety."  

In a statement released on Tuesday, Ells said: "The safety of our customers and integrity of our food supply has always been our highest priority," adding that if there are opportunities to do better, Chipotle will push to find them and further enhance its safety standards. "Our deepest sympathies go out to those who have been affected by this situation and it is our greatest priority to ensure the safety of all of the food we serve and maintain our customers' confidence in eating at Chipotle," he said. 

Somewhat ironically, as of early Nov. 5, Chipotle's last tweet was one on Oct. 30, which noted that "Typical fast food has creepy additives, like Tbhq. Tbh, fresh food doesn't need it." TBHQ is a preservative that's added to processed foods, acts like an antioxidant, and is FDA-approved in small amounts in oils and other products, but has a "controversial reputation" due to negative effects seen in very high dosages in animal tests, according to Healthline.com.

For Chipotle, this latest crisis is complicated by the fact that the chain has seen two other contamination incidents in recent months.

In August, there was a salmonella outbreak, linked to tomatoes in 17 Chipotle units, most based in the Minnesota Twin Cities region, that affected 64 customers (nine hospitalized). Also in August, a Chipotle in Simi Valley, Calif., was shuttered for a time after nearly 100 customers and employees were, according to health officials, sickened by Norovirus. 

Seattle-based food-safety lawyer Bill Marler asserted to The Associated Press that three such incidents within a couple of months indicates that Chipotle isn't paying enough attention to food safety.

The documentable fallout of this E. coli outbreak to date has included a lawsuit seeking $75,000 in damages from Chipotle, filed on Nov. 2 by a woman who said she was sickened after eating a burrito bowl in a Vancouver, Wash. Chipotle on Oct. 21. 

The company's stock price has been affected, at least in the short term: It closed at $614.98 on Nov. 4, down from $640.23 on Oct. 30, prior to the news of the outbreak. 

And as Time magazine noted, temporary closure of 43 stores — about 2% of its stores — while lauded by experts as a means of preventing the risk of further spreading the bacteria, will have at least some impact on Chipotle's bottom line. 

Some of the outcome for the brand will depend on how quickly the cause can be identified and, of course, whether Chipotle can successfully avoid any future food contamination.   

Contaminated raw produce is suspected as the cause in this case — far from an unusual occurrence in recent years, which have seen outbreaks caused by spinach and several other types of vegetables sold in supermarkets. 

Experts quoted by the Associated Press and others noted that Chipotle's much-touted use of local sources where possible, and its promises that it can track its ingredients from farm to table in real time through use of tracking software, should facilitate identifying the specific source of the outbreak. Those promises will be put to the test. And one expert also noted that the use of the same ingredients in multiple dishes at Chipotle could complicate the investigation. 

The unknown at this point, as always in cases in which food contamination has affected restaurants, is how the wide press coverage and social media buzz around these instances will impact the Chipotle brand.

Certainly, anti-Chipotle forces are doing their best to capitalize on the incidents. A group that calls itself The Center for Consumer Freedom — which will identify its backers only as unidentified restaurants and food companies — on Nov. 4 upped its attacks on Chipotle by running a full-page ad in The New York Post headlined "You Can't Spell 'Chipotle' Without E. Coli."

That group had already created an actual Web site, ChubbyChipotle.com, devoted to criticizing Chipotle for the high calorie counts of some of its offerings and questioning basically all of Chipotle's ingredients and other claims. (The satiric graphic shown above is from this site.) The site's header parodies Chipotle's famed "Food With Integrity" brand promise by crossing out "integrity" to create the headline: "Food with Hypocrisy."

Next Moves Critical

Laura Ries, principal in the Ries & Ries brand and marketing consultancy, gives Chipotle high marks for its fast, concrete actions in the immediate hours and days after the problem emerged. 

"They went above and beyond by shuttering all of those restaurants voluntarily," she notes to Marketing Daily. "That was a bold move, and they communicated it to the press well, so that the E. coli outbreak headlines have been immediately followed in articles by those voluntary closures."

She notes that "when you're successful, people are going to come after you" for all kinds of reasons, even in the absence of a real crisis. "Look at McDonald's, which gets far more criticism and negative buzz than Burger King and other close competitors," she says. She adds that Chipotle's "integrity" promise and aggressive marketing against processed food makers and other fast-food chains is bound to make it a particularly attractive target.  

However, she stresses that the strength of Chipotle's brand gives it a major advantage. "It takes a lot for consumers who are fans of a brand to turn against it, and given Chipotle's proactive moves, I doubt that the brand will be hurt in the long term — unless, of course, they have more, repeated instances like this." 

Still, she says, given that this is the third instance of contamination (although the first two received substantially less coverage), it's critical that Chipotle now find ways to address consumers about food safety in a way that is understandable and relatable. Reis notes that given Chipotle's "brilliant" use of videos and other media to convey complicated subjects, including how the food supply chain works, they might consider using the same capabilities to squeeze lemonade from lemons (so to speak) by spearheading an education campaign about how food contamination can occur, and how it can be avoided.

Similarly, Andrew Alvarez, an industry research analyst with IBIS World, noted that how long it takes for Chipotle to convince consumers of its safety is critical. "A lot of it is convincing the consumers that they’re safe,” Alvarez told Time magazine. “If you can’t reach the consumer halfway and make them feel safe, you’ve essentially lost a lot of business.”

While it's since made major recovery strides, Chobani — another brand that built its phenomenal success on marketing its natural ingredients and processes — lost a point in market share (according to a brand spokesperson) after a serious product recall in 2013, allegedly caused by mold in some products that sickened about 200 people, reported Inc.com.