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Chipotle’s Fall from Grace and Plan to Revive Itself

In 2015, a number of major companies in the food industry were forced to deal with the backlash surrounding a foodborne illness tied to their products. Chipotle Mexican Grill was the focus of scrutiny following an e. coli outbreak surrounding its West Coast stores and a norovirus outbreak linked to a Boston location.

Although the two foodborne illness outbreaks linked to Chipotle may be over, the court battles the chain will face have only begun. The Centers for Disease Control and Prevention (CDC) released a notice Feb. 1 that indicated both e. coli outbreaks linked to the chain appeared to be over. The initial outbreak enveloped 11 states and sickened 55 people, resulting in 21 hospitalizations. A second, smaller e. coli outbreak linked to the chain spread to three states, infecting five and sending one to the hospital. CDC noted that no deaths were linked to the outbreak. The chain will still need to contend with a class-action lawsuit filed Jan. 19 that alleges the company attempted to cover up a norovirus outbreak in Aug. 2015. The lawsuit focuses on a norovirus outbreak linked to a Simi Valley, CA, location that sickened at least 234 customers, reported Fortune (Jan. 21).

Chipotle stated that it was served with a federal grand jury subpoena as part of a criminal investigation tied to a norovirus outbreak this summer at one if its California restaurants that sickened 234 people. The investigation is being conducted by the U.S. Attorney’s Office for the Central District of California in conjunction with the FDA’s Office of Criminal Investigation. The company said the subpoena requires the company to produce a “broad range” of documents and that it intends to fully cooperate with the investigation, reported NBC News (Jan. 6).

Later, Chipotle confirmed that the scope of a previously disclosed federal criminal investigation widened beyond a single restaurant in California. The company was served with a subpoena requiring it produce documents related to company-wide food safety dating back to the start of 2013, reported The State (Feb. 2).

In addition, a Chipotle shareholder filed a class action lawsuit against the chain and two top officials. The suit seeks to recover damages caused by the defendants’ violations of the federal securities laws in the wake of the California norovirus outbreak that allegedly sickened 100 customers before expanding to a number of other locations. The suit alleges that the defendants made materially false and misleading statements regarding the company’s business, operational and compliance policies.

In an effort to improve its food safety procedures, the company will close its stores for a few hours Feb. 8 for a company-wide meeting on food safety. The shutdown will offer an opportunity to talk about food safety changes and answer employees’ questions about the recent outbreaks of E. coli, norovirus and salmonella, reported Chicago Tribune (Jan. 14).

The company will also will spend upwards of $50 million for a marketing campaign in the first quarter aimed at winning back customers scared away by multiple food-borne illnesses last year. The company hopes that the campaign, in conjunction with stricter food safety protocols, will help reverse a drop in same-store sales that reached as high as 36% in January, reported The Denver Post (Feb. 2).

Editor’s note: This blog post contains information from the Jan. 11, Jan. 25 and Feb. 8 editions of The Food Institute Report. To stay up-to-date with the latest Washington regulatory news, become a Food Institute member and receive access to our bi-monthly 24-page report. Visit https://www.foodinstitute.com/joinfi for more information.