Chipotle-Case-Study-Final.Pdf
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CONTENTS 3 Abstract 4 About Chipotle 4 Financial Growth 4 Agencies of Record 5 Crisis Overview 5 What is E. coli? 5 Chipotle’s Communicaton Strategy v 6 Timeline 7 Stakeholder Network 8 Stakeholder Reactons 8 CEO & Corporate Employees 8 CDC 8 Store Employees 9 Farmers & Suppliers 9 Loyal Customers 9 E. coli Victms 10 Press Response 10 Public Response 11 Impact of the E. coli Crisis 11 Financial 11 Reputatonal 12 Conclusion 13 Appendices 15 References 2 ABSTRACT In an increasingly health-conscious society, the fast-food industry has faced frequent critcism regarding both freshness of ingredients and quality of food producton methods. People ofen complain that healthy food choices are not afordable food choices. An apparent excepton to this trend has been the fast-casual Mexican restaurant chain, Chipotle, Inc. Promotng Food with Integrity, Chipotle has long been vocal in their eforts to serve natural ingredients, prepared in-store. Indeed, when a restaurant does focus on integrity and quality to such an extent, consumers naturally expect a certain level of food safety. Therefore, the E. coli virus outbreaks, which afected Chipotle customers between October and December 2015, had a signifcant infuence on their public image. This report will discuss these incidences, the reactons of the company and its stakeholders, and analyze the impact on Chipotle’s business. 3 ABOUT CHIPOTLE Chipotle Mexican Grill, Inc. is an American fast-casual restaurant chain that specializes in Mexican cuisine. Founded by Steve Ells in 1993, Chipotle was originally based in Colorado and had just 16 restaurants. Today the brand has restaurants in the United States, United Kingdom, Canada, Germany, and France. Chipotle operates out of approximately 2,000 locatons and employs a staf of more than 45,000. Chipotle is known for claiming that Food with Integrity is paramount in the preparaton and sale of their food. Its business model highlights the company’s eforts to only use naturally-grown ingredients, serve naturally raised meat, and prepare most of its food in-store. It has asserted frequently that it is the only chain restaurant to successfully implement this mantra. Chipotle’s main compettors include Qdoba Mexican Grill, Moe’s Southwest Grill, Rubio’s Coastal Grill, and Pancheros Mexican Grill. financial growth In 1993, following an $85,000 loan from his father, Steve Ells launched Chipotle, Inc. Due to the success of his frst restaurant, Ells opened a second branch in 1995. The following year, to expand further, Ells then took out a loan from the U.S. Small Business Administraton. Ells’ father contributed an additonal $1.5 million, and Ells raised $1.8 million by forming a board of directors. Between 1998 and 2001, McDonald’s invested $360 million. This signifcant fnancial backing helped the company to rapidly expand, and by 2001 McDonald’s had become Chipotle’s largest investor. In 2006, Chipotle became a publically traded company, and McDonald’s fully divested itself. agencies of record Since 2014, Austn-based advertsing company GSD&M has been Chipotle’s principal media agency of record. One recent campaign of note, Ingredients Reign, plays on the American interest in royalty by presentng their ingredients as the royal family of the Chipotle brand. As of December 2015, Chipotle also hired Carrot Creatve as their frst social media agency of record. This associaton was brokered to move past the food safety concerns and reputaton crisis following the well-publicized outbreaks of E. coli that were linked to Chipotle in 2015. Carrot Creatve stated their role as not merely reactve, but rather proactve, to overhaul brand standing. The agency is responsible for all social media content and analytcs, as well as paid media on platorms including Facebook, Twiter, Snapchat, and Instagram (Stein, 2015). In January 2016, Chipotle ended its long-standing afliaton with public relatons frm Edelman. This was a somewhat surprising decision, as this break came afer several years of mutual proftability. “We agreed in early October to part ways with Edelman at the end of the year,” said Chris Arnold, Chipotle’s Communicatons Director. Arnold credited this move to “a sizable piece of business that [Edelman] were taking on that presents a confict” for Chipotle’s business. Later in March, Chipotle hired PR agency Burson-Marsteller, a leader in public relatons crisis management (Bradley, 2015). Burson-Marsteller has covered both consumer and corporate PR such as media relatons, public afairs and executve positoning for Chipotle since then. 4 crisis overview Between October and December 2015, Chipotle Mexican Grill sufered two outbreaks of the highly infectous E. coli O26 virus. The United States’ Food and Drug Administraton (FDA) and Centers for Disease Control and Preventon (CDC), worked in conjuncton with state ofcials to investgate both incidences. In January 2016, the CDC noted a total of 55 reported infectons across 11 states: California, Delaware, Illinois, Kentucky, Maryland, Minnesota, New York, Ohio, Oregon, Pennsylvania, and Washington. Most the 21 hospitalized victms were in Oregon and Washington during October 2015. In February 2016, the CDC ofcially closed investgatons, announcing that they were unable to fnd any conclusive evidence that would point to a specifc cause. Regardless, these incidents led many to queston the Chipotle company moto: Food with Integrity. what is e.coli ? E. coli is a bacterium that grows in the digestve systems of humans and other animals. The bacterium is most commonly found in undercooked meat, unpasteurized milk and fruit juice, and vegetables grown in cow manure or washed in contaminated water. Many people fall ill two to eight days afer consuming the germ. Commonly noted symptoms include diarrhea and abdominal cramps. Most people recover within a week, yet some reported cases have lasted longer and resulted in serious illnesses including kidney failure. E. coli infectons are typically diagnosed through the testng of stool samples. People of any age can become infected, although young children and the elderly are more susceptble to developing severe illnesses because of E. coli. communication strategy Following the announcement of an outbreak of E. coli, traceable to Chipotle restaurants, CEO Steve Ells issued a public leter of apology on December 16, 2015. In the leter, Ells said, “The fact that anyone has become ill eatng at Chipotle is completely unacceptable to me and I am deeply sorry.” He contnued, acknowledging that Chipotle had let its customers down when it came to food safety. He then promised to improve Chipotle’s food safety programs, and launched an eight-part initatve that would update restaurant operatons and food preparaton 6 methods. The leter and the food safety changes were published in myriad media outlets, on the Chipotle company website, and on social media platorms (Lorenzet, 2015). Steve Ells also chose to appear on NBC’s The Today Show. In a candid interview, Ells again apologized for the outbreak. He then asserted that Chipotle was doing everything possible to ensure both safe and healthy food for its customers again: “We’re thinking about the safety and quality of our ingredients to put in place practces that will not enable this to happen again, practces that are so far above industry norms today that we will be the safest place to eat” (Stump, 2015). 5 timeline Sept. 11, 2015 Chipotle restaurants in Minnesota sufer a salmonella outbreak. 45 cases eventually traced to tomatoes. Oct. 31, 2015 Chipotle temporarily closes 43 restaurants. Nov. 10, 2015 Chipotle reopens those restaurants in the Pacifc Northwest, which were closed following an inital Nov. 20, 2015 E. coli outbreak. All units were sanitzed and food Chipotle releases informaton regarding E. coli entrely replaced. occurrences in New York, California, and Ohio. Dec. 4, 2015 Chipotle outlines new food safety measures, as Dec. 8, 2015 E. coli-related illnesses spread to Illinois, Maryland, Chipotle publishes outlines for a new plan to make the and Pennsylvania. chain a leader in food safety. Dec. 10, 2015 Steve Ells appears on The Today Show to apologize for Dec. 16, 2015 the E. coli outbreaks. PR experts and public opinion Chipotle CEO, Steve Ells, issues an apology leter in condemn Chipotle’s crisis management thus far. major news publicatons and the company’s owned media. Dec. 21, 2015 The CDC opens a new investgaton into E. coli incidences in Oklahoma, Kansas and North Dakota. Dec. 23, 2015 Chipotle introduces new food preparaton and cooking procedures to prevent future foodborne Jan. 8, 2016 illness. Chipotle is sued over allegedly misleading shareholders with food safety statements. Jan. 13, 2016 Chipotle CEO Steve Ells claims to be “extremely Feb. 1, 2016 confdent” that the E. coli crisis is now over. CDC closes investgatons into the Chipotle E. coli crisis. Feb. 8, 2016 Chipotle closes stores naton-wide for compulsory June 30, 2016 employee food safety training. Chipotle simultaneously Chipotle Marketng Executve Mark Crumpacker is launches its Raincheck Burrito Campaign, giving away indicted in a notable cocaine seizure in New York City. free burritos whilst stores remain closed for training. Chipotle puts Crumpacker on administratve leave. July 1 Chiptopia, Chipotle’s frst loyalty program, is July 5, 2016 launched. Chipotle launches a new advertsing campaign, A Love Story, to re-create positve associatons with Sept. 4, 2016 the brand and remind consumers of their fresh With stocks low, Chipotle launches advertsing ingredients and Food with Integrity mission. campaign Ingredients Reign, to emphasize the trustworthiness of their ingredients and their preparaton. 6 stakeholder network 7 stakeholder reactions ceo & corporate employees Chipotle CEO and founder, Steve Ells, released an open leter addressing the outbreaks. Ells promised eight signifcant advances in company food safety procedure. Further informaton was provided an additonal link. This included a video explaining the developments. Chipotle also took steps to ensure that all food would henceforth be prepared as fresh and safely as possible.