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Cramer: Chipotle's tipping point for the natural and organic food industry

Chipotle's stock has fallen hard this month, and Jim Cramer thinks that this is due to Whole Foods getting hit with a with a notice of "serious violations" from the Food and Drug Administration (FDA).

While it seems that there could be a stigma forming in the market for natural and organic stocks, Jim Cramer thinks this too shall pass.

"It almost seems like there is 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 is not processed into oblivion first," the "Mad Money" host said.

Whole Foods and Chipotle both are known for their distrust of the traditional food chain and the chemicals used to process food. Take one look at the ingredients in a Chipotle burrito: there are obvious differences between it and a Taco Bell burrito.

A employee sprinkles cheese on a burrito at a Chipotle Mexican Grill restaurant in Hollywood, California.
Patrick T. Fallon | Bloomberg | Getty Images
A employee sprinkles cheese on a burrito at a Chipotle Mexican Grill restaurant in Hollywood, California.
"It is worth pointing out that memories aren't that long, even when it comes to illnesses." -Jim Cramer

Shoppers and customers at Whole Foods and Chipotle have displayed concern over the longer-term impact of processed food to their health. Yet, it seemed to Cramer that this topic has hit a tipping point, where people are now more concerned with short-term considerations, like sickness from bacteria.

"That is why I think Chipotle was able to break down so swiftly through $400," Cramer said.

While Chipotle has become very stringent in its safety standards since the incidents, the fact is that endless bad news will have an impact. Especially when many think these incidents occur because of the perception that they don't pump the foods full of preservatives, even though the reason both Whole Foods and Chipotle were successful to begin with.

But Cramer is not giving up on Chipotle for the long term.

For example, both Yum Brands, the parent of Taco Bell, and Jack in the Box's Qdoba have previously had health scares that were far worse than Chipotle's.

In fact, both companies were able to bounce back within 18 months of the incidents. That gave Cramer confidence that Chipotle could do the same.

"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 that E. coli, norovirus and listeria now come with the natural and organic territory," Cramer said.

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