Chipotles PR Crisis — Crashing of $CMG and Parting with ineffective PR Company Edelman

Nobody orders E. coli when placing an order at a restaurant. Sometimes it comes unexpectedly packaged in a menu offering. E. coli causes possible kidney failure, dehydration, and diarrhea. Food trade business owners find headlines about E. coli frightening. Food industry associates have lessons to learn from the recent Chipotle crisis.

Experts believe Chipotle to be survivors. An E. coli outbreak may present a bump in the road for the popular food chain. The goodwill of beloved customers has the momentum that keeps a major controversy from affecting its popularity.

Chick-fil-A was not affected by an anti-gay stance the company seemed to portray. Market researchers are confident Chipotle’s reputation, and the company’s transparency makes the incident less serious than for some relatively unknown entity. In the past, Chipotle proved that it put its mission of healthy, sustainable food above its concern for profits.

The company issued statements to the media, voluntarily closed The Washington and Oregon restaurants and hired food safety consultants to assess and potentially improve food safety precautions. Over the years, consumers prove to be forgetful and forgiving when a company is open and direct, renews its commitment to better monitoring, and fixes the problem. Public relation and communication companies recall this result in problems with anything from washing machines to automobiles.

Chipotle parted association with the Edelman PR agency and is in search of new PR support. Since 2008, Edelman served Chipotle as the Authorized Organizational Representative for its national PR. Reasons for the parting of ways cited included the taking on of a sizeable business interest by Edelman that presented a Chipotle conflict.

The expectation is to have a new firm in place shortly. A choice from proposals made by excellent agencies is in the review process. Edelman representation confirmed the ending of its dealings with Chipotle. There was no mention of clients that posed a conflict.

Edelman has no involvement in the ongoing food safety crisis. The briefs are thought to call for crisis and issues counsel to supplement a Denver-based firm’s work that handles the management of the crisis. Nearly 500 customers had negative effects of the E. coli outbreak in several restaurants. Sales declined, and some outlets closed. A 30 percent drop in sales for December resulted from an ongoing probe by the Centers for Disease Control and Prevention of the E. coli outbreak and the national media attention that surrounds the Massachusetts norovirus incident.

Campaigns included in the Edelman work done for Chipotle are ‘Back to the Start,’ ‘Cultivating Thought,’ and ‘Farmed and Dangerous.’ In recent years ‘Scarecrow’ drove the success of the ‘food with integrity’ position. The ‘Scarecrow’ film that won the 2014 PR Grand Prix campaign award contrasted Chipotle’s naturally raised meat and fresh ingredients to the evils of industrial agriculture. The film triggered scrutiny of Chipotle’s supply chain.

A visible stance on such issues as going GMO-free is likely to be part of issues management by Chipotle. In recent years, Chipotle experienced rapid growth. The company expects to have its first quarterly decline at the end of 2015. The company’s focus is now on attracting customers to come back to the outlets. Admittedly, marketing out of current issues is not possible. The SEC filing acknowledged a federal subpoena related to a criminal probe of the Chipotle restaurant norovirus incident that occurred in August at a Simi Valley, CA outlet.

Plans to repurchase $300 million of shares in addition to $300 million previously allocated are in place. As of January 7, 2016, stock prices were close to $400 per share. That is a plummet from the August price that approached $800 per share.

Jonah Engler is an entrepreneur from New York City.