We have a rare up day for Chipotle's (CMG) stock --see how long that lasts -- despite still one more psychological blow to the concept of organic and natural: a notice from the FDA of "serious violations" at a Whole Foods (WFM) facility that was found to have bacteria that could result in illness.
I say this is a wound to Chipotle because it almost seems like there's a jinx to those companies trying to do the right thing when it comes to food processing, the jinx being worries that maybe organic and natural means unsafe to eat because it's not processed into oblivion first.
These two companies are deeply linked with distrust both of the food chain and to all the chemicals that are used to adulterate food, allegedly to make it safer.
We know that shoppers at Whole Foods and customers of Chipotle are repeatedly shown to be more worried about the long-term impact of processed foods in their bodies. But I fear at some moment will there be a tipping point where people are more worried about the shorter-term considerations -- namely sickness from bacteria -- than the multiyear accumulation of adulterated foods.
That's why I believe Chipotle was able to travel so swiftly through $400. Even though I think Chipotle's become the gold standard for safety since the incidents, the fact is you can't have endless bad news that implicates the anti-food-chain players as somehow being unsafe because they don't have preservatives, the latter being the chief reason why Whole Foods and Chipotle were successful to begin with.
I don't think, for example, that Moe's Southwest Grill would have surpassed Chipotle if it weren't for the publicity surrounding the illnesses connected to the once-dominant natural and organically worshipful company. Sure, it is just psychological, but it does matter in terms of the price to earnings multiple. You don't feel comfortable paying up for the shares of a company that's got less appeal than something that says "gotta go to Moe's."
So should we lose faith in the stock? I say, ultimately, no. Why? Because both Yum (YUM) -- Taco Bell! -- and Jack-in-the-Box's (JACK) Qdoba are now rated higher, and while you shouldn't invest in irony, it is worth noting that both chains were decimated at one point by terrible food-illness incidents, far, far worse than anything that happened at Chipotle.
The fact that Jack and Taco Bell were able to bounce back beginning 18 months after the incidents should give you comfort that Chipotle can, too.
I know, if Chipotle's stock continues to retreat, that news will be cold comfort. But it is worth pointing out that memories aren't that long, even when it comes to illnesses, provided you don't think they now come with the natural and organic territory.