Taco Bell sales dip amid cyclospora lettuce outbreak, other chains feel impact
A cyclospora outbreak linked to shredded iceberg lettuce has lowered same-store sales at Taco Bell and reduced foot traffic at several salad-focused chains, while lettuce prices have risen sharply due to weather-related supply constraints.
Restaurant sales have slipped as a cyclospora outbreak tied to shredded iceberg lettuce spreads across several states. Yum Brands, the parent of Taco Bell, reported a 2% decline in same-store sales for the July-September quarter, reversing a 7% gain in the previous quarter. Federal health officials initially linked the diarrhea-causing parasite to shredded lettuce served at Taco Bell locations in Indiana, Kentucky, Michigan, Ohio and West Virginia, later expanding the list to include Illinois, Kansas, Oklahoma and Pennsylvania. Taco Bell removed the lettuce supplied by Taylor Farms on July 17, and the supplier recalled lettuce grown in central Mexico the following day.
"With respect to the consumer sentiment, we’ve seen real improvement as consumers have understood better the nature of the issue," CEO Chris Turner said, adding that the brand’s quick response and clear social-media communication helped restore diner confidence.
Sales bottomed out the weekend of July 18-19 but have been climbing, according to CFO Ranjith Roy, with U.S. sales nearing half of last year’s level after four days of growth. The chain also promoted daily specials such as a $1 Mexican pizza to attract customers. Yum Brands’ shares rose 6% in morning trading.
Other operators are also feeling the fallout. Chipotle Mexican Grill cut its same-store sales forecast for the July-September period to a 1% increase, down from an earlier 3% estimate. Foot traffic at salad chain Chopt fell 12% as of July 23, while weekly spending at Sweetgreen dropped 10 percentage points compared with the same period last year, according to market-research firms.
Sweetgreen said its food has not been linked to the outbreak and emphasized its ability to trace ingredients from farm to restaurant. Researchers continue to investigate a newer cluster of 72 cases, seeking to map the outbreak’s complexity.
The lettuce market has been strained by a hot, early season in Arizona, which produces about a third of U.S. lettuce. Prices for iceberg lettuce rose nearly 20% from January to June, and overall fresh-lettuce costs were 33% higher in May than a year earlier, according to USDA data. Supply challenges were compounded by higher fuel costs following geopolitical tensions that raised transportation expenses for perishable produce.
"The cold chain needs to be maintained. Cooling and transporting it is very important," said Elizabeth Canales, an associate professor of agricultural economics at Mississippi State University.