Business analysis of Chipotle Mexican Grill Crisis

The Idea of Business Clients and Media Influence

The idea of business clients is highly influenced by the concepts of the media. Unfavourable media coverage can be a challenge to a company's standard and invariably cause a steep fall in its sales revenue. The drop (slight or drastic) in sales alters negatively the revenue of the company, thus, retarding profits. Customer's focus is basically tied to reviews and comments about the commodities or services they utilize as well including the company delivering them. Based on the scope of operations, it is rather almost inevitable for unwanted circumstances to occur as they come about unanticipatedly. Ventures or establishments cannot avoid the occurrence of hazards but what is important is the light in which such happenstances are managed or dealt with. Nonetheless, ill reports on such occurrences by broadcasting agencies can be costly to the organization. The major problem with the media agencies is that they jump at every news story that comes across the desk. In the process of seeking an audience, the media prefers negative news and company crises. Reporters fail to consider the impact of inappropriate of a crisis to the company's reputation. The American fast-casual chain of restaurants, Chipotle Mexican Grill was hit by a series of Escherichia coli (E. coli) outbreaks in 2015. The crisis was magnified when news agencies started reporting about the outbreaks without prior confirmation of the information sources (Grulke, 2017). The negative reporting painted an image that all Chipotle outlets have been infected with the bacteria. Customers panicked and refrained from buying food from Chipotle restaurants. As a result, Chipotle sales went down by a big margin and their profits reduced drastically. News about the crisis was broadcasted in the Television stations, written in newspapers, and posted on the social media sites. Most operations in the Chipotle outlets were crippled as customers feared for their health.

The Chipotle Mexican Grill

The Chipotle Mexican Grill is an American fast-casual chain of restaurants. Chipotle has establishments in Germany, France, United Kingdom, Canada, and the United States. The restaurants specialize in making tacos, bowls, salads, and burritos. The company is a member of the New York Stock Exchange and trades under the symbol CMG. The company was founded in 1993 by Steve Ells who is currently the Chairman and Chief Executive Officer (CEO). The company headquarters are located in Denver, Colorado, in the United States. In 2015, Chipotle's net income was approximate US$475.6 million and had employed more than 45, 000 workers in its outlets. Currently, the company has established 2, 250 locations and has employed 64, 570 workers. However, after the 2015 E. coli outbreak crisis, Chipotle's net income shrunk by 85 percent to US$22.94 million in 2016 (Grill, 2016). Similarly, the company recorded a reduction of revenue, operating income, total assets, and total equity due to the E. coli outbreak crisis.

The Escherichia coli (E. coli) Crisis

The Escherichia Coli (E. coli) outbreak occurred in a single Chipotle location in Seattle. The outbreak was reported in July 2015 and the source of the bacteria was not immediately identified. Food and nutrition specialist identified the bacteria strain as E. coli O157: H7. The bacteria develops in the body in 3 to 4 days after the person swallows the germ contained in contaminated food. The bacteria affected five people at the first instance. In October 2015 another E. coli outbreak was reported in multiple Chipotle outlets in different states. The affected states included California, Ohio, Illinois, New York, Maryland, Minnesota, Oregon, Pennsylvania, and Washington. From the affected States, a total of 52 people were infected with the bacteria (Gilkerson, Swenson, & Anderson, 2016). The affected people experienced a nose and mouth bleeding, fatigue, fever, pale skin tone, and abdominal pains. A majority were able to recover from the infection within a week. Health officials identified the specific strain as E. coli O26. Besides, the health officers stated that there was no connection between the July and October E. coli outbreaks in Chipotle outlets. The source of the bacteria was not identified, but health officials linked it to poor food handling and storage. According to the Center for Disease Control, the October E. coli outbreak left 21 people hospitalized. The CDC suggested that a common ingredient served at Chipotle restaurants is the probable cause of the outbreaks (CDC, 2016). However, the specific food item or ingredient was not identified even after rigorous laboratory tests.

Media Contribution in the Crisis

The media magnified the E. coli outbreak crisis through negative reporting and making of statements that defamed Chipotle Mexican Grill restaurants. 'The Oregonian' was the first to report the July E. coli outbreak and linked it to one of the Chipotle outlets in Seattle. The news agency cautioned people against purchasing food products from the Chipotle restaurant as they could get infected with the bacteria. The 'MarketWatch' news agency commented that the 2015 E. coli outbreak was an indicator that Chipotle Mexican Grill restaurants were sourcing food from stores that did not have elaborate food-safety testing procedures. This statement by the MarketWatch indicated that Chipotle was not keen on the safety of customers since vegetables were processed from centralized stores instead of using individual stores. The New York Times criticized Chipotle Mexican Grill for being rhetoric about how they observe food integrity yet the E. coli outbreak shows otherwise. A Popular Science magazine writer claimed that customers may be at a very high risk of contracting foodborne diseases from the Chipotle restaurants (Grulke, 2017). A writer who works for The News & Observer newspaper criticized Chipotle's claim of providing 'food with integrity' as a lucrative mockery and a mere marketing scheme to generate revenue. Due to the negative reporting, the price of the Chipotle stock at the New York Stock Exchange dropped by 12 percent. In 2016, the company's revenue, net income, operating income, total assets, and total equity significantly reduced. The company was affected as sales hit their lowest for the last quarter of 2015 and the better part of 2016. Chipotle blamed the government for lack of proper handling of the outbreak and the media for negative reporting that substantially hurt the company's public image and revenue.

Chipotle's Efforts to Recover

Chipotle has tried to improve their hygiene standards to attract customers back to their outlets although the response has been sluggish. The company has now been using the media to persuade customers to go back to its restaurants. In 2016, Chipotle started running Television commercials that were aimed at luring customers back to its restaurants. According to the Advertising Age news agency, it was the first time for Chipotle Mexican Grill to run a TV commercial since 2012 (Wohi, 2016). Besides using the television, Chipotle has been paying for articles to feature in major newspapers with an aim of reaching many customers. As part of marketing and promotion, the company has embraced the use of social media such as Facebook to run posts that may attract customers back (Tucker, 2014). Radio advertisements for Chipotle continue to air persuading customers that hygiene has been observed and operations at the restaurants are improved.

References

CDC. (2016, February 1). Multistate Outbreaks of Shiga toxin-producing Escherichia coli O26 Infections Linked to Chipotle Mexican Grill Restaurants. Retrieved from Center for Disease Control and Prevention: https://www.cdc.gov/ecoli/2015/O26-11-15/index.html
Gilkerson, N., Swenson, R., & Anderson, B. (2016). Farmed and Dangerous? A Case Study of Chipotle’s Branded Entertainment Series and Polarized Reactions to its Satirical Depiction of Farming and Agribusiness. Journal of Applied Communications.
Grill, C. M. (2016). New Chipotle Food Safety Procedures Largely in Place; Company Will Share Learnings from 2015 Outbreaks at All-Team Meeting. Press release, January, 19.
Grulke, C. F. (2017). A Study of Chipotle Mexican Grill’s E. Coli Outbreak through Social Media.
Tucker, E. (2014). Business Continuity from Preparedness to Recovery: A Standards-Based Approach. Butterworth-Heinemann.
Wohi, J. (2016, October 25). Chipotle Running TV Ads For First Time Since 2012. Retrieved from Advertising Age: http://adage.com/article/cmo-strategy/chipotle-running-tv-ads-time-2012/306458/