I had my go at Chipotle on Friday. Here’s some other views.
Brian Sozzi of Real Money writes that from blasting McDonald’s and the fast-food industry on earnings calls, to a company spokesman e-mailing me all of the harmful ingredients that McDonald’s uses to giving a figurative middle finger to competitors in online marketing videos, members of Chipotle’s top brass have gotten a big head.
I believe they have lost their sense of humility.
I encourage them to take a trip to Starbucks (SBUX) in Seattle and sit down with CEO Howard Schultz. That guy exudes humility. Sure, Schultz is known to get riled up on earnings calls when his baby is criticized by a stock analyst, but I have not once heard him disparage competitors on earnings calls or take success for granted. When that humility is lost among executives, it puts the company in a position to be attacked when times get tough — as they are at Chipotle now. Frankly, it just leads to operational miscues.
Each and every Chipotle leader needs to look within today and reassess their attitudes — the CFO, for example, should be embarrassed by how he handled himself at this week’s investor’s conference. The guy made it sound as if the media secretly planted E. coli at Chipotle locations across the country to cook up desktop and mobile traffic in the last month of the year.
Even Steve Ells’ performance on the “Today” show Thursday lacked authenticity. I watched that appearance 11 times. The stock may have rallied on the apology, but if you bought Chipotle’s stock on the news, I encourage going back to watch the footage: The culture of arrogance is still there, and it has to be eradicated at a chain growing as quickly as Chipotle.
Norovirus in Boston because of a sick worker? Operational neglect. Closing a Seattle restaurant Thursday due to food not being kept hot enough? Operational neglect.
Five outbreaks in six months?
Seattle suffered the first E. coli cases in July, followed by almost 100 cases of norovirus in California’s Simi Valley the following month.
Chipotle restaurants in Minnesota infected around 70 people with Salmonella in September, and over 140 Boston College students were confirmed with norovirus earlier this week. And there was another outbreak of E. coli that was not publicly known until recently. The Centers for Disease Control and Prevention in its latest count cited 52 cases of E. coli in nine states, the majority of which were reported in Washington and Oregon.
“I’ve been doing this since the Jack in the Box outbreak of 1993 and the number of possible cases in such a short period of time is something I’ve never really seen before,” said William Marler of the Seattle-based Marler Clark LLP.
Chipotle, which has 1,900 locations nationwide, closed 43 stores in the two states before reopening them following deep cleaning and inspections by local health officials. The Brighton, Mass., restaurant near the B.C. campus also shuttered as local health agencies investigate the outbreak, The Boston Globe reported.
Chipotle’s stock dropped nearly 30% from August to December, according to CNN Money. But the shares gained some ground back after Chipotle founder and co-CEO Steve Ells pledged to make the restaurant “the safest place to eat” Thursday on NBC’s “Today” show.
Darin Detwiler, senior policy coordinator at STOP Foodborne Illness and an adjunct professor in the regulatory affairs of food and the food industry department at Boston’s Northeastern University, said cooking fresh ingredients in traditional ways is no excuse. “Don’t you and I do that at home?” he asks. “If I am cooking for my family, I’m responsible.”
While it’s clear that using canned and frozen foods could make it easier for Chipotle to meet food safety standards, a diverse supply chain shouldn’t stop the company from meeting regulatory requirements. “It may be more challenging that you have to tell more people to pay attention, but that’s really not that much of a challenge,” says Doug Powell, a former food safety professor and the publisher of the food-safety-focused Barf Blog. “You put in place your standard operating procedures, you have your plans, you go ahead and do it.”
Timothy B. Lee of Vox writes that rather than pandering to groundless fears about GMO safety, Chipotle would have served its customers better by focusing on the very real dangers of food tainted with E. coli, norovirus, or salmonella. Theoretically, it should be able to do both, of course, but like any organization Chipotle has limited resources. A dollar it spends guarding against the overblown threat of GMOs is a dollar it can’t devote to preventing actual health problems.