By Richard Berman
Media Outlet: Forbes
Chipotle’s stock has fallen 45% in the past few months following several E. coli outbreaks linked to the company. But a quieter E. coli incident at Costco shows how things could have been different.
The Costco outbreak was first reported in early November, just after the Chipotle case had made headlines. But within a couple of weeks, the problem was over. Investigators had traced the problem to chicken salad, and a produce supplier in California then conducted recalls of products possibly containing a contaminated ingredient—not just from Costco, but other retailers as well. The company’s stock was higher on Dec. 31 than before the Centers for Disease Control and Prevention made its initial announcement about the outbreak.
Marketing can’t hide the truth
While Chipotle had a well-known marketing narrative, it apparently didn’t have a good enough food safety system. The company is scrambling to recover after its co-CEO, Steve Ells, made a tone-deaf statement to the media that Chipotle’s food safety protocols had always “met or exceeded industry standards.” (The hospitalized customers might disagree.)
The lesson is that reality always catches up to marketing. You can’t outrun the truth forever.
Chipotle became an icon through its marketing, putting out competitor attack videos like “The Scarecrow” which drew millions of views online. But Chipotle’s narrative—that regular food production practices are bad—was never sustainable, to steal one of their buzzwords.
The warning signs were there. Chipotle’s image that the mainstream food system is bad was undermined by the company’s own reliance on it. While a small percent of its food is “local,” Chipotle regularly uses the same distribution network that larger companies like McDonald’s uses, and many of its suppliers are large-scale. The company claiming to value local-ness in their supply chain was sourcing beef from Australia and pork from Europe. The company pandered to Internet rumor-mongers by announcing a “GMO-free” policy last year, even though scientific authorities across the world have dispelled the tall tales about genetically-modified foods. Meanwhile, Chipotle’s use of “local” food when available may well have hampered the traceability of food implicated in the bacteria and virus incidents.
More troubling than obvious brand hypocrisies is that Chipotle was well aware of its shortcomings.
Take Chipotle’s policy banning the use of any antibiotics in livestock raised for Chipotle meat. In an annual report a few years ago, Chipotle admitted that “herd losses may be greater” by requiring this policy. Unnecessary animal deaths hardly jives with Chipotle’s “humane” marketing. (And in any event, all meat is antibiotic-free, given government mandated elimination periods before an animal enters the food supply.)
Chipotle also admitted in an annual report that the “significant commitment to serving local or organic produce” pledged by the company could “make it more difficult to keep quality consistent, and present additional risk of food-borne illnesses.” As a lawyer, I’d be worried about that statement. Chipotle is facing lawsuits from customers its food allegedly sickened. A U.S. Attorney is investigating one outbreak and a grand jury has subpoenaed the company. Food safety is taken very seriously. Recall the 2010 Salmonella outbreak that resulted in prison time for two egg farm executives.
Marketers shouldn’t steer the ship
Chipotle is an example of what happens when an ideology or marketing fad steers the ship. An image is built that looks good on the outside while the core is neglected.
Adopting advertising fads may generate short-term applause. But when people are going to the hospital, or feel-good practices are exposed for their side effects, the legal department will be left to clean up the marketing department’s mess.