Fall in Chipotle shares displays the raw power of bad PR

It has been quite a year for corporate crises, from Tesco to Talk Talk. But even more surprising is the type of companies that have fallen from grace this year. It is a stark reminder of the importance of operational and communications rigour in any organisation.

Airlines are more prone to crises, for obvious reasons, but no one would have expected one of the world’s favourite car brands and a fast-growing restaurant chain to encounter reputational crashes.

Much has already been written about Volkswagen’s emissions scandal. However an equally surprising corporate downswing is that of Mexican food chain Chipotle. At the beginning of 2015, Chipotle (although famously difficult to pronounce) was on the lips of marketing experts; both because of its rapid expansion globally and an innovative approach to communication.

Over the past five years the ‘fast casual food’ sensation has eschewed advertising for compelling, high-production value films about organic farming and ethical sourcing. Chipotle’s marketers have screened these entertaining polemics against ‘industrialisation’ on subscription TV channels such as Hulu, and they have become viral phenomena. Chipotle has picked up multiple awards at advertising festivals such as the Cannes Lions.

At the time of writing however, Chipotle shares are down 19 per cent this year; because of the chain’s poor handling of E.Coli poisoning across its network in the USA. The Center for Disease Control (CDC) has reported that 45 people – in New York, California, Ohio and Minnesota - have been infected with a strain of E. coli, 43 of whom reported eating at a Chipotle restaurant. And earlier in November, after an E.Coli outbreak hit 22 customers, Chipotle temporarily closed 43 outlets in and around Washington and Oregon states.

Chipotle, despite its reputation as a great communicator, has been slammed for being sluggish with its response to the crisis. And this is partly because it has failed to identify the source of the infection. All of which starts throwing into question the preparation processes of a firm that has tried to be as ‘natural’ in its food as possible.

Neither Volkswagen nor Chipotle are inherently bad businesses, but their reputation managers are discovering the hard lesson that the devil lies in the day-to-day detail.