A recent outbreak in October 2015 has captivated everyone’s attention as hundreds of news reports dominate in about every news network. Chipotle, a franchise known for having the healthiest organic ingredients, has depreciated its stock price after several cases of E-coli were disclosed in numerous consumers. Reports reveal information about fifty-three customers who were infected with E-coli in nine states including Oregon, Washington, California, Minnesota, New York, Ohio, Illinois, Maryland, and Pennsylvania. As a result, forty-three Chipotle restaurants closed for cautionary purposes. Although the commotion has ended with the solution of officials from the Centers for Disease Control and Prevention investigating the issue and intensifying food safety procedures, Chipotle is still suffering through an immense decline in sales.
Customers discontinued the consumption of meals from Chipotle in fear that they would become infected with the virus. As seen in the image, profits plunged throughout the last four quarters. The public has lost faith in the quality of the food produced by Chipotle, causing them to abominate the restaurant for putting them at the risk of severe disease. The stock price has plunged to a disappointing $480 when it was originally $730 before the E.coli chaos. Investors have also lost faith in the company so they have sold stocks that they have invested earlier in the year. For this reason, the market value of the company has plummeted leaving the company at a loss. Merrill Lynch and CRT Capital, credit rating agencies, both downgraded Chipotle and five analysts cut their price targets for the company. As you can see, there are several factors that contribute to the slump of Chipotle’s wealth. While Chipotle is in a crisis to recover their sales, rivals celebrate as the previous Chipotle fans revert their preference to alternatives.
Data proves that Chipotle’s rivals are benefiting through Chipotle’s struggles. Many rivals had growth in sales as customers turned to alternative fast foods/restaurants. Some of these businesses include Taco Bell, Moe’s Southwest Grill, and Qdoba, all of which had a growth ranging from 4%-8%. Taking advantage of what has happened, sales increased with no extra marketing necessary because they have similar choices as the poorly repudiated, Chipotle. In addition, Chipotle lost market share to Qdoba, being its biggest rival and Meditteranean restaurant, Zoe’s Kitchen. Although Chipotle and Panera are said to be the two leading fast food chains for their healthy food choices, Panera may be taking the lead because of the E.coli outbreak.
Not only is their reputation damaged, but profit margin may also be affected. The chain of restaurants may need to reduce their prices in the future so people start to buy their food once again. On top of low sales, the business will have a lower margin which may barely exceed their costs. The entire corporation is put at risk as it is possible for it be at default in the near future. Although these are only possibilities, Chipotle must take action to acquit their name. All in all, the erupted conflict resulted in improved cautionary procedures by the Center for Disease Control and Prevention which is one of the few beneficial impacts of the event that occurred. Going forward, other companies and Chipotle itself will be attentive so such action does not occur again.