Chipotle and the Cost of Crisis

A hard look at what happens when the market loses faith in your brand

There’s a lot out there discussing the importance of reputation and the harm crises can do to a brand or organization. When it comes to making the call to spend a serious chunk of budget on crisis management, however, what decision makers want to see is hard numbers.

Well, look no further. If you need convincing as to the damage crises can do to the financial status of your organization, take in this Bloomberg chart tracking high and low stock price targets for the brand:

chipotle analyst price targets chart bloomberg cropped

If a publicly held company loses the faith of investors, well, let’s just say trouble only begins to describe the situation.

We’ve ripped into Chipotle’s crisis management already because of some absolute statements made by CEO Steve Ells, namely declaring on the Today show that, “The procedures we’re putting in place are so above industry norms that we are going to be the safest place to eat.” This came back to bite the burrito chain big time when more outbreaks came to light, but it doesn’t seem a lesson was learned the first time around.

Yesterday, Ells once again took the mic, this time at a conference in Florida. There, he dropped a couple of sentences that left our crisis-trained brains reeling.  “We are all very confident that this E. coli outbreak would not happen again,” and, “We know that Chipotle is as safe as it’s ever been before,” earn the distinguished double-facepalm from us as the many ways those words could backfire ran through our heads the second we read them in media coverage of the event.

First off, just how confident are you? Because if there is ONE more outbreak of ANYTHING those words are getting flung back in your face. Second, and most egregious, is saying that Chipotle is “as safe as it’s ever been.” Well, the evidence of the immediate past is that Chipotle has not, in recent history, been very safe, so Ells words aren’t exactly reassuring. Who is media training this man? And assuming they’re giving him good advice about using absolute statements, why isn’t he listening? You can’t get out of a hole until you put down the shovel.

While the promises gave a short-term bump to Chipotle’s stock price, the threat they’ve created will make it a one step forward, wayyyy more than two steps back should more negative news come to light. In our very experience-based opinion, it’s just not worth it.

The BCM Blogging Team
www.bernsteincrisismanagement.com

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