Read "Case 12: Chipotle Mexican Grill's Strategy in 2018: Will the New CEO Be Able to Rebuild Customer Trust and Revive Sales Growth?" in your Connect textbook. Write a 350- to 700-word response that addresses the following questions:What factors contributed to the loss of confidence in the Chipotle brand?Do the actions taken to date present a strategy that would improve consumer trust? Why or why not?Consider Chipotle's competitors. How does Chipotle's internal environment compare to the internal environment of one of Chipotle's competitors?Based on this analysis, what is the probability that the strategic moves implemented by Chipotle would lead to a sustainable competitive advantage? Explain.What additional recommendations would you make for Chipotle to gain consumer trust and reclaim a leadership role in the fast food industry?Provide justification for your response.Based on the information presented in this case study, what kind of business strategy would you suggest to help Chipotle achieve a competitive advantage? Chipotle Mexican Grill's Strategy in 2018: Will the New CEO Be Able to Rebuild Customer Trust and Revive Sales Growth? Arthur A. Thompson The University of Alabama Headed into August 2015, Chipotle (pronounced chi-POAT-lay) Mexican Grill's future looked rosy. Sales and profits in the first six months of 2015 were at record-setting levels, and expectations were that 2015 would be the company's best year ever. But a series of events occurred over the next five months that alarmed customers, drove down sales at Chipotle restaurants, and proved frustrating for Chipotle top executives to fix. • In August, a salmonella outbreak in Minnesota sickened 64 people who had eaten at a ChipotleMexican Grill. The state's Department of Health later linked the illness to contaminated tomatoesserved at the restaurant.• In August, 80 customers and 18 employees at a Chipotle Mexican Grill in Southern California reportedgastrointestinal symptoms of nausea, vomiting, and diarrhea that medical authorities and county healthofficials attributed to “norovirus." Norovirus is a highly contagious bug spread by contaminated food,improper hygiene, and contact with contaminated surfaces; the virus causes inflammation of thestomach or intestines, leading to stomach pain, nausea, diarrhea, and vomiting. After the reported foodpoisoning, the restaurant voluntarily closed, threw out all remaining food products, and sent home theaffected employees. Employees who tested positive for norovirus remained off duty until they werecleared to return to work. County health officials also inspected the facility on two occasions andrendered passing grades, despite finding several minor violations. The restaurant reopened thefollowing day, and no further food poisoning incidents occurred.• In October, 55 people became ill from food poisoning after eating at 11 Chipotle locations in thePortland, Oregon, and Seattle, Wof E. coli bacteria typically associated with contaminated food. Most ill people had eaten many of thesame food items, but subsequent testing of the ingredients at the 11 Chipotle restaurants did not revealany E. coli contamination. (When a restaurant serves foods with several ingredients that are mixed orcooked together and then used in multiple menu items, it is difficult for medical studies to pinpoint thespecific ingredient or ingredients that might be contaminated.) State and federal regulatory officialsreviewed Chipotle's distribution records but were unable to identify a single food item or ingredientthat could explain the outbreak. Nonetheless, out of an abundance of caution, Chipotle managementvoluntarily closed all 43 Chipotle locations in the Portland and Seattle markets, pending acomprehensive review of Page C-121the causes underlying the food contamination and a check ofwhether any of Chipotle's food suppliers were at fault. Chipotle management worked in closeconsultation and collaboration with state and federal health and food safety officials (includingpersonnel from the Centers for Disease Control and Prevention, the U.S. Department of Agriculture'sFood Safety and Inspection Service, and the U.S. Food and Drug Administration) throughout theirinvestigation of the incident and also launched a massive internal effort review of the company's foodpreparation and food safety procedures. These internal actions included:ington areas. Medical authorities attributed the illnesses to a strain 1. Confirming that more than 2,500 tests of Chipotle's food, restaurant surfaces, and equipment all showed no E. coli.2. Confirming that no employees in the affected restaurants were sickened from the incident.3. Expanding the testing of fresh produce, raw meat, and dairy items prior to restocking restaurants. 4. Implementing additional safety procedures and audits, in all of its 2,000 restaurants to ensure that robust food safety standards were in place.5. Working closely with federal, state, and local government agencies to further ensure that robust food safety standards were in place.6. Replacing all ingredients in the closed restaurants.7. Conducting additional deep cleaning and sanitization in all of its closed restaurants (followed by deep cleaning and sanitization in all restaurants nationwide). Meanwhile, the Federal Drug Administration sought to identify a cause for the outbreak. The FDA's investigation revealed no ingredient-related cause and no evidence that particular suppliers were the source of the outbreak. Ultimately, no food item was identified as causing the outbreak and no food item was ruled out as a cause, although fresh produce was suspected as the likely cause.After health officials concluded it was safe to do so, all 43 restaurants in the Portland and Seattle markets reopened in late November 2015, roughly 6 weeks after the incident occurred.• Later, it was confirmed that at least 13 people in nine other states became infected with the same strain of E. coli linked to the Chipotle restaurants in Oregon and Washington states.• In early December 2015, five people in three states-Kansas (1), North Dakota (1), and Oklahoma (3)-became ill after eating at Chipotle Mexican Grill restaurants. Studies conducted by the Centers for Disease Control and Prevention (CDC) determined that all five people were infected with a rare strain of E.coli different from the infections in Oregon, Washington, and nine other states. However,investigators used sophisticated laboratory testing to determine that the DNA footprints of the illnesses in the Midwest were related to those in the Portland and Seattle areas.• In mid-December 2015, about 120 Boston College students became ill after eating at a Chipotle Mexican Grill near the campus, an outbreak that local health officials attributed to a norovirus. Health officials also tested students for E. coli infections but the tests were negative.Extensive reports of the last three incidents in the national media took a toll on customer traffic at most all Chipotle locations. The average decline in sales at Chipotle locations open at least 12 months was a stunning 14.6 percent in the fourth quarter of 2015, causing Chipotle's revenues in Q 4 2015 to be 6.8 percent lower than in the fourth quarter of 2014. The company's stock price crashed from an all-time high of $758 in early August 2015 to $400 heading into 2016.
