Taco Bell, a subsidiary of Yum Brands, is grappling with the fallout from a cyclosporiasis outbreak linked to its shredded iceberg lettuce. The U.S. Food and Drug Administration (FDA) first tied the parasitic outbreak to Taco Bell in mid-July, prompting the chain to remove the lettuce from its U.S. restaurants. Meanwhile, Yum Brands reported mixed second-quarter earnings, with revenue and earnings per share slightly missing Wall Street expectations.
Immediate Impact on Sales
Taco Bell has seen a significant decline in foot traffic since the outbreak was linked to its lettuce. Data from Placer.ai shows visits dropped by 21% as of July 23, with some regions experiencing double-digit percentage declines. The outbreak has also led to several lawsuits against the chain. Despite this, Taco Bell has launched lettuce-free promotions, including a $1 Mexican pizza deal and $1 enchiritos offer, which have boosted its app's popularity.
Broader Industry Effects
The outbreak has not only affected Taco Bell but also other restaurant chains that serve fresh lettuce. Chipotle Mexican Grill reported that consumer mistrust of lettuce has weighed on its sales in late July. The CDC has confirmed 6,707 lab-confirmed cyclosporiasis infections since May 1, with many cases originating in Michigan and Ohio. The outbreak has been linked to lettuce sourced from central Mexico and a single supplier, Taylor Farms.
Yum Brands' Financial Performance
Yum Brands reported second-quarter earnings of $1.62 per share (adjusted) and revenue of $2.17 billion, slightly below analyst expectations. Net income rose to $853 million, up from $374 million a year earlier. The company's global same-store sales increased by 3%, driven by new restaurant openings. However, the outbreak's impact on Taco Bell's sales is expected to be a focus during Yum's earnings call.
Taco Bell's Response
Taco Bell has taken steps to mitigate the outbreak's effects, including removing the implicated lettuce and promoting lettuce-free menu items. The chain's app has seen a surge in popularity, briefly becoming the top free app on the Apple Store before settling into second place. The company has not yet provided an update on the outbreak's financial impact during its earnings call.