retail news in context, analysis with attitude

CNBC said yesterday that "federal prosecutors in central California wanted 3 years' worth of information on food safety matters" as they look into a norovirus outbreak there that left 207 people sick.

The embattled restaurant company - which has been dealing with a multitude of food safety crises despite its self-identification as a company that believes in 'food with integrity' - made the revelation even as it announced that its Q4 same-store sales were down 14.6 percent, though profits - down 44 percent to $67.9 million compared with $121.2 million a year earlier - weren't as bad as many analysts expected.

Still, the company has major obstacles to deal with as it attempts to rebuild trust among its patrons. The Wall Street Journal has a story about how, as Chipotle has looked to revamp its safety procedures, it sometimes has come into conflict with federal regulators.

CEO Steve Els "sometimes was at odds with the CDC, which helped investigate the outbreak of E. coli tied to Chipotle that sickened 55 people across America, as well as a smaller E. coli outbreak that sickened five more," the Journal writes. "Chipotle executives publicly complained the CDC was issuing too many updates. The CDC, in turn, bristled at Chipotle’s going public with statements such as Mr. Ells’s mid-January suggestion that the agency could soon declare the outbreaks over.

"Behind the scenes, Chipotle also disagreed with health officials about the E. coli’s likely source, said people familiar with the discussions. Government officials leaned toward produce. Chipotle concluded the E. coli was most likely from contaminated Australian beef."

The CDC has said that the outbreak is over, but that the cause has not been determined.
KC's View:
On the plus side, Chipotle has enviable brand equity that can help it regain traction in the marketplace. But on the negative side, at least some of its value proposition - local, fresh foods - has been demonstrated as potentially putting the company at risk, because of lack of central controls. This is going to be a tough balancing act, and it'll be interesting to see how Chipotle manages it.

Food retailers have to pay very close attention. A focus on local, fresh foods is exactly what a lot of food retailers have invested in, and there is at least a strong possibility that the same circumstances that gave Chipotle a lesson in humility could affect them. I've talked to enough retailers about their food safety practices to have a sense that there is way too much faith and far too little actual knowledge about what they're doing, what they know about their supply chains, and how they would respond to shifting demands for transparency and disclosure.

The food industry should do better. It must do better.