Chipotle Mexican Grill can’t catch a break. Following the October 2015 E. Coli outbreak which hit several states including: California, Washington, Pennsylvania, and New York, the situation escalated even further when one location in Massachusetts was named the source of a norovirus outbreak in December 2015 that reportedly sickened over 100 students. Now, in early 2016 Chipotle is again making unwanted headlines: Chipotle Under Criminal Investigation After Foodborne Illness Outbreaks. The restaurant chain is being investigated by the U.S. Attorney’s Office for the Central District of California and the FDA’s Office of Criminal Investigations for the August 2015 norovirus outbreak at their restaurant in Simi Valley, California.
Right Image: E. Coli infections December 2015; Source: CDC
Left Image: Norovirus Illnesses 2014; Source: CDC
The company was served with a Federal Grand Jury Subpoena seeking documents related to over 200 norovirus cases linked to the Simi Valley location by the U.S. Center for Disease Control (CDC). Not particularly good news for a company whose stock has dropped to the low $400s from $750 since the Simi Valley incident.
Chipotle’s efforts to be among the healthiest restaurants have been stymied by the tiniest of organisms, bacteria and viruses. To get ahead of the issue the company reported that it spent between $14 to $16 million in 2015 to replace suspect food, conduct lab analyses of food and environmental swabs, engage food safety experts, and reserves for legal claims. Management also enlisted marketing to help reassure customers the company is working diligently to identify root causes, bolster food safety policies and procedures, and continue its efforts to bring customers safe, healthy food.
Chipotle may be alone in today’s headlines, but most major restaurant chains have faced the challenge of a foodborne illness in their history:
- 1983 McDonald’s E. Coli
- 1993 Jack In The Box: E. Coli
- 1997 Burger King: E. Coli
- 1999 Kentucky Fried Chicken: E. Coli
- 2003 Chi-Chi’s: Hepatitis A
- 2006 Wendy’s: E. Coli
- 2006 Taco Bell: E. Coli
- 2010 Subway: Salmonella
No restaurant is immune whether it’s a national chain or a local bistro.
Given the potential for negative publicity – not to say anything of financial liability – big and small producers, processors, distributors and restaurants as well as grocers and convenience stores are researching solutions to get ahead of the problem. They realize the importance of preventing it in the first place, rather than reacting to the news. One business that will surely benefit is the food inspection and safety business. Food Safety Tech published a piece forecasting the Food Safety Testing Market will reach over $6 billion by 2020. Based on Markets and Markets research, testing in the U.S. will be led by process foods, followed closely by meat and poultry as well as dairy products.
Markets and Markets breakdown of 2014 Food Testing Market by major food type
Surprising among these forecasts is the relatively small amount spent on fruits and vegetables. This may be partially due to the fact that major corporate food processors have the resources to spend millions of dollars to test their products to ensure their safety, particularly since they may be perceived as having very deep pockets and therefore are a more significant target for litigation. It may also be partially due to the relatively low value of fresh fruits and vegetables versus processed foods, meat and poultry, and dairy. Sadly, this may be shortsighted. Recall the fresh sprout outbreaks of years past, as well as the recent cantaloupe borne listeria outbreak to understand that the risk is significant.
Markets and Markets 2015-2020 growth projection for major foods by type, a CAGR of 7.4%
Add to this the fact that FSMA will require every segment of the food chain to do their part to ensure food safety; from producers to processors, distributors to retailers and restaurants. The $6 billion number is a good start but may be low depending on how the next few years of FSMA rules take shape. In the meantime both big and small players in the food safety chain can take proactive steps to do their part.
One step is to deploy continuous monitoring of refrigerators and freezers. State of the art devices using cellular technology can send alerts and alarms even when the location being monitored loses power, providing an invaluable tool to keep ahead of problems, not find out about them hours, days, or even weeks later. It may seem like a big investment for a relatively low value item, like fruits and vegetables, but the risk is entirely too significant to ignore.