The Special on This Year’s Menu: Change

The food industry will experience a great deal of change in 2016. While most would suggest that the FDA’s implementation of FSMA is at the root of these changes, two key events of 2015 can be seen as “game changers” in the way the industry will view policy change over the next year and beyond.

In my column, “Food, Justice, and the American Way” (September/October 2015, bit.ly/1Rm2KEO), I discussed how the PCA case is notable as having imposed the most significant length of prison time for a food corporation executive. (Stuart Parnell was sentenced to 28 years in prison.)

This was a shocking turn of events because, prior to this outcome, few federal lawsuits were brought against food corporations. When they were, it generally resulted in short, almost non-existent prison consequences for causing illnesses and deaths of consumers (as seen with the recent cases against the Jensen Brothers’ cantaloupe farm and DeCosters’ egg company.)

Over the past few years, changes in the federal government’s litigious response to food companies’ actions has created an impact on the food industry. This is not, however, the only change of late.

As of the writing of this article, Chipotle Mexican Grill, (which, in 22 years, grew to over 1,900 stores across North America and the UK) was tied to five outbreaks in 2015 with numerous customer illnesses:

• E.coli O157:H7 in Seattle, Wash., (with at least five known customer illnesses).
• Norovirus in Simi Valley, Calif., (200). Salmonella Newport in Minnesota (64).
• A multi-state E. coli O26 outbreak in California, Illinois, Maryland, Minnesota, New York, Ohio, Pennsylvania, and Washington (52).
• Norovirus in Boston, Mass., (136).

Chipotle’s CEO Steve Ells spoke on national TV news outlets about the many “new” food safety challenges they face and how the company will be the safest in the industry from now on. Many in the media focused on the financial impact of the crises, as Chipotle’s stock value fell by 43% in the fourth quarter of 2015. As of January 6, Chipotle reports indicate that it is under an FDA and U.S. Attorney criminal investigation in connection with the Simi Valley, Calif., outbreak.

What stands out about this federal investigation is that, while FDA has taken legal action against food companies in the past, the federal government has not had a history of taking legal action against restaurants. Case in point—in the aftermath of the 1993 E.coli outbreak, no state or federal criminal charges were filed against Jack in the Box or its executives for their roles in the illnesses of over 650 people in four states and the deaths of four children due to inadequate cooking of contaminated hamburger patties.

The federal government’s current litigious response to food companies that break the law will likely continue to create an impact on the industry, forcing owners and even quality assurance managers to rethink their responsibilities to their customers. This is not, however, the only cause for change in how the food industry will look at its policies in 2016 and beyond.

CURVING THE POLICY CURVE. Historically, corporate risk tolerance (or resistance to policy change) did not always take place during the initial monitoring stages of a crisis (under pressure by stakeholder expectations or even political development), but only during or after the resolution stages, such as legislation, litigation, and regulation (Fig. 1, red curve).

Today, the Chipotle case can be seen as an example of what may be the new trend in food companies’ responses to policy change much earlier and driven more than in the past by pressures earlier after, or even during, a crisis (Fig. 1, green curve). This change in policy appears to be driven by a large and growing population of vocal stakeholders—consumers.

Chipotle’s rapid and significant loss in stock value and its December sales figures (down almost 30%) are not due to legal injunctions or FDA recalls, but to the change in purchasing decisions of their “loyal customer base.” Essentially, based on their learning of all the outbreaks tied to Chipotle, customers voted with their dollars and chose to spend elsewhere.

Social media and online news sources have been quick to report on and criticize Chipotle. I, myself, have been interviewed by eight journalists representing a variety of audiences from network news to medical magazines and the food packaging industry. Chipotle Chief Financial Officer Jack Hartung has responded by telling Wall Street investment analysts that he blames the company’s financial mess on CDC and the media for reporting too much information to customers.

The food industry, especially the retail and restaurant side, is now forced to consider the fact that today, more than ever before, consumers will play a continually increasing and significant role as stakeholders. The potential positive result may be a more proactive approach to enacting and enforcing food safety policies and safer food.

Darin Detwiler is the Consultant and Adjunct Professor, Regulatory Affairs of Food and Food Industry, Northeastern University.