Chipotle Mexican Grill’s (CMG) sales, and stock, have taken a big beating ever since an E. Coli outbreak in October at some of its Oregon and Washington stores.
The once high-flying burrito chain has seen its shares fall nearly 30% since then, and last week, Chipotle said same-store sales this quarter could fall as much as 11% because of the news. E. Coli is unpleasant business: the bacteria is found naturally in the intestines of healthy people, but some strains can cause cramps, diarrhea, and vomiting. Humans can become exposed to E. Coli from contaminated water or food.
At an investor conference on Tuesday, Chief Financial Officer Jack Hartung, laid a good chunk of blame of how big a problem this outbreak has become for Chipotle on two culprits: the government and the media.
In particular, Hartung took issue with what he characterized as the U.S. Centers for Disease Control and Protection’s (CDC) way of reporting developments in the outbreak, specifically the manner in which the CDC has been reporting one incident at a time rather than a quick, broad probe.
“It’s been fueled by the sort of unusual, even unorthodox, way the CDC has chosen to announce cases related to the original outbreak in the Northwest,” Hartung told Wall Street analysts. “They’ve done that a couple of times now and they’re not announcing new cases – they’re simply announcing new reporting to them from local health agencies.”
And that in turn has prompted the media to fan the hysteria, he claimed.
“Of course the press writes ‘Outbreak expands to new states’, which is not true,” he lamented, noting that all E. Coli cases occurred in the same window, from October 24 to November 7, and that later cases that were revealed stemmed from the same outbreak.
“Because the media likes to write sensational headlines, we can probably see when somebody sneezes that they’re going to say, ‘Ah, it’s E. Coli from Chipotle’ for a little bit of time,” Hartung said.
Though this sounds like sour grapes and frustration, and hardly the best way to manage a crisis, it’s easy to see how a big a problem this has become for Chipotle, for years a Wall Street darling that seemed would never come back down to earth.
As the graphic below shows, Chipotle’s perception with consumers, based on a rolling poll by YouGov Brand Index, which interviews 4,500 people each day.
Chipotle itself is feeling it.
“There’s been some degradation of loyalty with some of our frequent customers,” Hartung said. “Not huge numbers, but they’re important customers. We’ve got to do some work there.”
