In July 2015, the first of six foodborne illness outbreaks hit the fast-casual restaurant chain. The initial bump in the road was an E. coli O157:H7 outbreak in Seattle, with five people on record as being infected. Then, in August, thanks to a sick employee in California, at least 234 people became infected with norovirus.
For the rest of 2015 the downward spiral continued. Thirteen states, seven months and more than 500 sick customers later, the burrito giant’s nightmare was deemed over by the Centers for Disease Control and Prevention. However, from a business standpoint, it was just getting started.
A look through Chipotle’s stock prices tells the story. The publicly traded company hit its all-time closing high of $757.77 on Aug. 5, 2015. By Aug. 31, 2015, stocks were closing at $719.23, a downward trend which landed at a closing price of $479.85 on Dec. 28, 2015.
The Denver-based chain struggled to reverse the trend was not over in the New Year, and continued to trend down to a close just under $380 at the end of December 2016.
Even though Chipotle didn’t issues recalls in connection with any of the foodborne illness outbreaks linked to its restaurants in 2015, the cost to its reputation hit as hard as a recall, with many of the same expenses involved. Chipotle had to close several restaurants for deep cleaning and sanitizing, similar to measures necessary at businesses that produce, pack, re-pack, distribute foods and sell them at retail.
Food recall surge
According to Stericycle Expert Solutions Recall Index, the Food and Drug Administration had a 34 percent uptick in recalls from the second quarter of 2016 to the third quarter, making Q3 the highest recall period since the first quarter of 2010.
Vegetables accounted for a whopping 86.5 percent of FDA’s recalls, with 89.1 percent of all recalled units having bacterial contamination.
United States Department of Agriculture recalls were also trending high, up 36 percent. Poultry was the highest contaminated animal product for USDA, at 50.9 percent of the total recalled pounds, while mixed protein products came in second at 39.2 percent.
This recall increase is a concern in the midst of this steadily growing trend of consumers demanding to know more about the food they purchase for their family’s table. They want to know where it comes from, how it got to their favorite local store and why they should believe it’s safe for their families.
In a white paper published in March 2016 by Kansas City-based ad agency Sullivan Higdon Sink, “Evolving Trust In The Food Industry,” 65 percent of consumers surveyed said they want to know how their food is produced. And, one out of three — 34 percent — somewhat disagreed or strongly disagreed with the statement “As a whole, food companies are transparent about how food is produced.”
The Food Safety Modernization Act (FSMA) is geared toward preventing and reducing foodborne illnesses, with rules addressing every aspect of production, from irrigation water standards to intermodal containers used to ship food. Such attention is not expected to result in fewer recalls because improved testing technology is able to find problems that previously went unnoticed, until consumers started getting sick.