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February 3 2016

The Chipotle Effect: When Companies Believe Their Own Hype

Forbes
Julie Gunlock

Earlier this week the federal Centers for Disease Control and Prevention finally closed the books on the investigation of the E. coli outbreaks at multiple Chipotle locations last December. The news of dozens (at one point thought to be hundreds) of customers getting sick made headlines nationwide and drove the burrito purveyor into a frenzy of apologies and promises of improved safety.

Other than telling us that people have stopped getting sick, though, the government investigators don’t seem to be providing us with much information on what caused the outbreaks. Chipotle CEO Steve Ells attempted to reassure customers and investors alike at a recent conference, saying that due to the company’s increased emphasis on food safety, the risk of another infectious outbreak was “near zero.”

Whether it was the carnitas or the cilantro-lime rice, though, there’s good reason to think that it could happen again. The problem with Chipotle is much bigger than rules about which head of lettuce is washed in which sink. It’s about what happens when corporate marketing becomes more important that the product itself, and it can only be fixed by understanding what a company like Chipotle exists to accomplish in the first place.

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Instead of focusing on actual food quality, the company seems to have been distracted by lifestyle trends and politically popular marketing gimmicks. Last April, the company announced that it had fully eliminated from its menu any ingredients that had been improved with genetic engineering. Despite agreement among food safety experts that genetically modified foods face no novel health risks, Chipotle invested a large amount of time and effort attempting to eliminate all GM ingredients from their operations. By September, however, the company’s lawyers were responding to a lawsuit alleging that they had failed, and had misled customers with their claim.

On the flip side, the company has also famously been unable to obtain steady supplies of some of the ingredients that do meet their requirements, like non-conventionally raised pork. They even warned investors in 2014 that the effects of global climate change might cause them to stop serving guacamole, although the Washington Post quickly responded by reassuring readers that “Chipotle’s guacamole isn’t going anywhere (for now).”

All of this puts additional burdens on the employees who are just trying to make sure that customers get adequately served. First, the more specific a corporate buyer’s requirements, the more brittle the supply chain becomes. A lot of suppliers will be able to sell you romaine lettuce and pork shoulder, but if you can only use lettuce that is locally grown and organic and pork that meets a laundry list of sustainability requirements, that can lead to a series of cascading shortages and delays if operations at any of those suppliers slow down.

The second concern is one of management focus. If the message filtering through the company grapevine is that “sustainable initiatives” and PR opportunities with environmental groups are the most important aspects of corporate culture, those are going to be the top priorities for every aspiring senior manager in the company. The more attention that is lavished on non-core tasks, the fewer eyeballs there are going to be watching out for the non-glamorous but far more important goals of food quality and sanitation. Who wants to stay at home filling out reports on soil microbes when the rest of the executive team is expensing a trip to Switzerland to dazzle a conference of fellow business leaders?

The final burden is the problem of a CEO who doesn’t seem to be 100% behind his own product. Corporate America is full of leaders who seem to spend more time rehearsing their TED talks than studying quarterly reports, but at least they are generally passionate promoters of their own products. Steve Ells, Chipotle’s founder and co-CEO, has often given off the aura of a corporate titan who is vaguely embarrassed to be in business at all.

Ells, a Culinary Institute of America graduate, originally aspired to a career in fine dining. As food writer Julie Gunlock recently mused, Ells comes off “like an art school graduate who takes a desk job to pay the bills” and regrets “scarring America’s landscape with yet another massive fast food franchise.” Hardly the profile of a confident corporate leader. If it is true, as he told the Huffington Post, that over the years he “felt a little guilty” every time another Chipotle opened, it is perhaps no surprise that the company has attempted to locate its moral center in everything but the humble practice of selling good food at a reasonable price.

In fairness, there is nothing necessarily wrong with a marketing strategy that includes fluff or caters to trendy consumer obsessions – if you deliver what you promise. To the extent that Chipotle’s corporate culture has caused it to ignore critical operations, however, it has wandered into dangerous territory indeed.

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Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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