Here we go again. With the dust still settling from the E. coli scare that shuttered several Chipotle Mexican Grill (CMG) locations and sent CMG stock reeling, the foodborne infection has taken aim at Starbucks (SBUX).
Specifically, the celery used to make some of its pre-packaged sandwiches was suspected as a host of the bacteria, forcing the coffee house to pull the affected paninis off the shelf.
It’s an embarrassing gaffe to be sure, even if it isn’t Starbucks’ fault. It’s also anything but bullish for Starbucks stock.
Unlike Chipotle Mexican Grill shares, though, SBUX stock has been able to shrug it off in stride. There’s actually a good reason or two for that persistent strength.
E. Coli, Redux
If the story sounds familiar — even beyond Chipotle Mexican Grill’s bout with E. coli last month — that may be because the celery suspected of carrying E. coli that was used in Starbucks’ turkey and dressing paninis is the same celery suspected of carrying E. coli that was also used in chicken salad recently sold by Costco (COST).
In the meantime, several other grocers including Wal-Mart Stores (WMT) and Target (TGT) have been asked to remove a great number of goods containing the suspect celery. All told, a total of 155,000 items may be affected.
As for Starbucks, it “only” has to remove 45,000 sandwiches.
The celery came from California’s Taylor Farms Pacific of Tracy, with most of the products being put on shelves in the western part of the U.S. Some of the 19 people who became victims of the bacteria, however, lived as far east as Virginia.
As for Starbucks, none of its customers are known to have been sickened by E. coli. It’s pulling the product out of its stores anyway, however, out of an “abundance of caution.”
Impact on SBUX Stock
A decade ago, a mere association with dangerous foodborne scare like this one could have been devastating for Starbucks stock, as an over-reactive public was skilled at assuming the worst, and mentally establishing if –> then outcomes that were effectively impossible.
Now though (and perhaps sadly), such news isn’t particularly surprising. Consumers as well as investors have learned to separate the tainted product from the organization selling it.
Simultaneously, in the shadow of swine flu breakouts, Ebola scares and a lengthening list of E. coli breakouts in the United States, the Centers for Disease Control as well as liability-adverse corporations have gotten very, very good at quelling breakouts before they can become epidemics.
That’s why owners of Starbucks stock can effectively trust that this problem won’t get out of hand and actually spur any new, unexpected infections. The CDC has effectively nipped it in the bud, so to speak, and Starbucks was more than happy to do its part. Indeed, removing 45,000 paninis (that may or may not have been tainted) from shelves is almost positive public relations with consumers that have been trained to appreciate what could be considered a proactive decision.
In other words, Starbucks proverbially turned lemons into lemonade, coming across as the hero that didn’t allow any of its patrons to become ill.
Bottom Line for Starbucks Stock
The point is, if the E. coli scare was going to do any real damage to Starbucks stock, it would have done so already.
It didn’t.
In a matter of weeks, if not days, this alarming news will be nothing but a faded memory for an overly distracted base of consumers. SBUX shareholders have nothing to worry about here.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
