Chipotle Mexican Grill (NYSE:CMG) may be proudly waving the "food with integrity" banner, but it doesn't necessarily mean that the food is safer for you. Shares of the market darling among fast casual eateries opened 5% lower on Monday after it had to temporarily close 43 restaurants in the northwest to investigate an E. coli outbreak.
At least 19 Chipotle customers people have fallen ill in the state of Washington with another three in Oregon contracting E. coli. A few of them have had to be hospitalized.
The investigation is still taking place. We don't know the item that potentially triggered the E. coli outbreak, but all 22 of the people that fell ill did eat at a Chipotle.
Chipotle will overcome the unfortunate incident, of course. The brand -- like the stock -- may take a near-term hit, but the bigger concern is if this leads some to wonder what they're paying a premium for if ingesting Chipotle's "better for you" grub can still trip up your insides.
This isn't an isolated event. It also had a incident with a food-borne virus that made dozens of its customers and employees stick in California this summer. That was broader in terms of the number of people that fell ill -- roughly 80 customers and 18 employees suffered gastrointestinal symptoms with some testing positive for norovirus -- but it was only limited to a single eatery in California's Simi Valley Town Center. That unit was scrubbed down, and the 18 hires weren't ordered back to work until they received medical clearance.
The new episode farther north is more problematic. Is it a supplier issue? Is this a problem at the Chipotle level? What kind of a financial hit will a company take by closing dozens of locations, inspecting and tossing out food, and then trying to repair that image in the local community?
Chipotle will be just fine in the long run. Comps remained positive during the summer quarter despite the Simi Valley Town Center incident, and even though this item is getting more national publicity it shouldn't disrupt the chain and its cult fave status. If customers didn't flinch last year when the chain pulled off its highest menu price increase in three years they're not likely to let an E. coli outbreak keep them away once the coast is clear.