Chipotle Faces Yet Another Food Safety Catastrophe
- By Mayank Marwah
The U.S. chain of fast-casual restaurants, Chipotle Mexican Grill (CMG), reported a 4.37% decline in its shares on Wednesday, which was the company"s worst stock decline in almost two months. Per sources, customers reported food poisoning symptoms after eating at a Chipotle restaurant in Los Angeles. This led public health officials to investigate the matter of a possible illness outbreak in one of the company"s restaurants in Los Angeles.
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Food-safety scandal hurts Chipotle
The company has been fighting a series of food safety crises over the past few years. The last time it became victim of food safety woes was two years back, and sales were hampered. While the company did fight back to return to profitability, its success was short-lived by increasing frequency of such incidents.
The burrito chain is aware that some of the employees in that outlet have become ill and therefore have been held out of work temporarily as a precautionary measure. At least three customers published reports on iwaspoisoned.com, a user-generated reporting site, claiming that they had experienced vomiting, diarrhea and nausea after eating at a Chipotle restaurant in Los Angeles. Chipotle issued a statement acknowledging the issue:
"We take any report of illness very seriously. We are aware of a few reports (two of which appear to be the same) on user generated reporting sites but there is no clinical validation associated with those reports, and we have not been contacted by customers directly to substantiate these claims. We have also not been made aware of any illness reports made to local health officials. As a precautionary measure, we have implemented heightened preventative procedures at this restaurant, which we do as a matter of policy if we ever receive reports of illness (even if they are not substantiated)."
Last word
Chipotle has a reputation of serving healthy and organic food. However, post the occurrence of norovirus and E.coli in 2015, the company"s sales have been adversely impacted. In September 2015, there was an outbreak of salmonella that was related to tomatoes in 17 Chipotle restaurants in Minnesota, sickening roughly 45 customers. In July this year, several customers fell ill in Virginia after a small outbreak of some disease. This harmed the company"s reputation to a great extent.
To win back its lost customers, Chipotle would need to get rid of all industrial additives and stick to natural ingredients.
Disclosure: I do not hold any position in the stock mentioned in this article.
This article first appeared on GuruFocus.
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The intrinsic value of CMG
