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Chipotle’s lettuce shortage and the future of America’s favorite burrito chain

AP Photo/Keith Srakocic
Bad burrito.
  • Alison Griswold
By Alison Griswold

Reporter

Published This article is more than 2 years old.

This post has been updated.

Here is a parable about burritos.

A few months ago, Chipotle was the darling of American dining. Its customers were loyal; its sales were only rising; its guacamole was pea-free. Then, disaster, in the form of widespread E. coli and a norovirus outbreak. Customers fled. Sales plunged. Chipotle went on a national apology tour and handed out coupons for free burritos. It overhauled food-handling procedures. It moved lemons behind the counter. Executives swore they would rebuild the brand in 2016, putting all signs of E. coli behind them.

But in New York, there was a lettuce shortage.

Nearly a month after US health officials declared an official end to Chipotle’s health scares, it’s the little things like lettuce that are still troubling Chipotle, and causing investors to wonder whether the brand will ever fully recover. On Tuesday, Deutsche Bank downgraded the stock to “sell” from “hold,” citing a “questionable recovery already priced in” and ongoing supply-chain problems.

“We remain concerned with the potential permanent loss of customers,” Deutsche’s analysts write. “More recently, additional developments have materialized that we believe call into question when the company can regain its footing including: out of stocks and increased in-store wait times (due to greater product safety scrutiny).”

Update, Feb. 23, 1pm: Chipotle spokesman Chris Arnold wrote Quartz to clarify that Chipotle’s lettuce shortage in New York was due to a “one day glitch,” and has been resolved. “There is no lettuce shortage,” Arnold says. “We have plenty of lettuce.”

Chipotle’s stock hit its most recent low in mid-January, down 37% from its pre-E. coli price of $640. Shares have ambled up since then, but it’s unclear how much they have left to climb.

“We believe CMG’s success made them a bit complacent,” Deutsche’s analysts say. “The company’s lack of interest in innovation over the last decade has resulted in what we consider to be menu fatigue.”

The flip side of this argument is that Chipotle’s menu is precisely what will pull it through the E. coli aftershocks. Chipotle won over America in large part by picking one thing—burritos (and burrito bowls, and tacos)—and doing it very well. At a time when other chains like McDonald’s were struggling to pare down their menus, Chipotle’s “a few things, thousands of ways” approach was its biggest selling point.

As Chipotle chases a recovery in 2016, it’s already started branching out. An ”unprecedented” marketing campaign the company launched this month includes traditional ads and direct mail—stuff Chipotle has traditionally eschewed. To improve safety, more food prep is being handled in centralized kitchens, bringing Chipotle closer to fast-food competitors like McDonald’s.

With all of these changes in the works, it seems unlikely that Chipotle will reboot its menu any time soon. And why should it?

What Chipotle had—its menu, its marketing, its whole schtick—was working until E. coli came along. Now the chain just needs to prove that, regardless of behind-the-scenes restructuring, its customers won’t have a different experience than they used to in the pre.-coli days. Random lettuce shortages don’t make that any easier.

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