Chipotle's E. coli outbreak threatens sales, emboldens critics

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Chipotle Restaurants Remain Closed Amid E. Coli Outbreak


Chipotle Mexican Grill Inc's food poisoning outbreak in Washington state and Oregon threatens to scare diners away from the popular burrito chain and has become fodder for one of its most vocal critics.

Health officials are scrambling to identify the cause of the E. coli food poisoning that has sickened 41 people, most of whom dined at eight Chipotle restaurants in the greater Seattle and Portland areas.

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All of Chipotle's 43 outlets in those cities have been closed since Oct. 31. The company is deep cleaning the closed units, testing and replacing food and has hired consultants to tighten up its food safety.

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Chipotle's E. coli outbreak threatens sales, emboldens critics
BOSTON - AUGUST 23: Colony of E. coli cells are grown in the synthetic biology lab at Harvard Medical School in Boston on Tuesday, August 23 2011. (Photo by Wendy Maeda/The Boston Globe via Getty Images)
ELIOT, ME - MAY 26: Kyler Dove, a seventh grader at Marshwood Middle School in Eliot, stops to take a drink from one of the 11,520 water bottles donated to the school Tuesday, May 26, 2015 by Cumberland Farms. Home Depot and Hannaford have also made donations to the school as it manages the current E coli scare. (Photo by Jill Brady/Portland Press Herald via Getty Images)
PORTLAND, OR - MAY 23: A shopper looks for bottled water on nearly empty shelves at a New Seasons Supermarket May 23, 2014 in Portland, Oregon. Oregon health officials ordered Portland to issue a boil-water alert after three separate samples tested positive for E. coli, a bacterium that can cause severe gastrointestinal illness. (Photo by Natalie Behring/Getty Images)
Jack Kurtz, 10, right, and mother Paula Gillett pose for portrait in their Rockford, Illinois home, November 5, 2009. Jack recovered from a food-borne illness last year. The source of the E. coli that hospitalized him was never determined. (Photo by Lane Christiansen/Chicago Tribune/MCT via Getty Images)
Madison Sedbrook, 6, right, and her mother Cindy are in their home at Highlands Ranch on Tuesday. Madison's parents are suing because she got e coli from eating raw cookie dough recalled by Nestle. Hyoung Chang/ The Denver Post (Photo By Hyoung Chang/The Denver Post via Getty Images)
PHILADELPHIA - FEBRUARY 21: A BJ's Wholesale Club awaits customers on February 21, 2007 in Philadelphia, Pennsylvania. Yesterday, the giant wholesaler announced a voluntary recall of prepackaged Wellsley Farms mushrooms, due to possible trace amounts of E.coli. No cases of the illness have been reported. (Photo by Jeff Fusco/Getty Images)
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Analysts expect the closures, and the negative publicity surrounding the outbreak, to depress sales at the roughly 1,900-unit chain that already was seeing its red-hot sales growth cool.

"Even after the company sounds the 'all-clear,' we believe that it will take some time for traffic to return," Maxim Group restaurant analyst Stephen Anderson said in a research note. He estimated that the same-restaurant sales hit could be as much as 75 basis points this quarter and 25 basis points in the first quarter of next year.

Shares in Chipotle, which has had two other food safety lapses this year, closed 1.3 percent lower at $614.98 on Wednesday. The stock closed at just over $750 on Oct. 13.

The Center for Consumer Freedom, a critic of Chipotle backed by the food and beverage industry, on Wednesday took a swipe at the chain with a full page ad in the New York Post reading: "You can't spell 'Chipotle' without 'E. coli'." In September, that group ran "Chubby Chipotle" ads criticizing the high calorie counts in some Chipotle dishes.

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Chipotle has won a loyal following and forced change in the restaurant business with its "food with integrity" policy that includes serving meat from animals that have never received antibiotics.

Health officials say the E. coli O26 strain implicated in this outbreak usually causes less severe illness than the E. coli O157:H7 that killed four children who ate contaminated and undercooked hamburgers at Jack in the Box in the early 1990s. No deaths have been reported in the current outbreak.

They suspect that contaminated fresh produce caused the current outbreak, but have yet to pinpoint the source.

(Reporting by Lisa Baertlein in Los Angeles and Jonathan Stempel in New York; Editing by Phil Berlowitz and Marguerita Choy)

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