Taco Bell removes lettuce linked to cyclosporiasis outbreak from restaurants

Taco Bell announced Friday that it has removed lettuce linked to an ancyclosporosis outbreak from its restaurants.

The outbreak has now affected more than 1,600 people in five states, according to the Centers for Disease Control and Prevention. According to the CDC, this infection is similar to severe gastroenteritis, and symptoms often begin to appear two to three weeks after being infected with the parasite. No deaths were reported.

The agency announced Thursday that an investigation into the source of the outbreak linked shredded iceberg lettuce served at Taco Bell stores in Indiana, Kentucky, Michigan, Ohio and West Virginia. The U.S. Food and Drug Administration is working with suppliers to determine whether the lettuce was sent elsewhere.

Taco Bell said in a statement: “Based on ongoing consultation with public health officials and out of an abundance of caution, Taco Bell worked quickly to voluntarily remove the product from our restaurants and the affected ingredients have been removed from our supply chain nationwide.”

Taco Bell’s parent company is yum brandshares have fallen nearly 7% over the past five days as the company deals with health concerns. Other food companies that sell fresh lettuce, such as salad chains, also saw their stock prices fall. sweet greena fast-casual chain that plummeted nearly 13% this week. kavadown more than 3%. There was a palpable sense of relief that the CDC did not identify those ingredients as a potential cause of cyclosporiasis, with Sweetgreen and Kava shares up more than 17% and about 2%, respectively, on Friday.

Amid swirling headlines about the outbreak, sales at Taco Bell and other restaurant chains may take a temporary hit, especially in states hit hardest by the outbreak, but analysts said the decline in sales and stock prices likely won’t be long-lasting. Still, it remains to be seen whether the CDC will identify other restaurant chains as possible sources of infection.

According to reports, the affected lettuce at Taco Bell may be traced back to supplier Taylor Farms, which distributes the product to many restaurant chains and sells it directly at most grocery stores.

Taylor Farms, the same company linked to the 2024 McDonald’s E. coli outbreak, said in a statement Friday that it has removed all iceberg lettuce from central Mexico. The company added that none of its branded salads or kits have been linked to the outbreak.

“While FDA follow-up indicates that certain independent farms representing less than 1% of the U.S. iceberg lettuce supply may be the source of the infection, we have indefinitely removed all iceberg lettuce from this area,” the company said.

Sweetgreen and other restaurant companies issued statements this week saying they did not believe their ingredients were affected. The salad chain said it does not use iceberg lettuce on its menu.

“Since the beginning of the investigation, we have been in close contact with our suppliers to confirm whether any raw materials within their supply chain have been identified as part of the investigation. To date, none have been identified,” the company said.

chipotle pepperThe company, which has not seen significant inventory changes this week, said in a statement Friday that its stores do not serve shredded iceberg lettuce and does not believe the ingredient is linked to the outbreak.

Analysts say the outbreak is unlikely to have a major impact on Yum Brands’ stock price, especially based on how restaurants have responded during past health scares.

This does not mean that there is no temporary effect. Recent data from Placer.ai shows that chains that serve fresh lettuce have seen a decline in foot traffic over the past week, with Taco Bell seeing a drop of nearly 6% and Panera Bread seeing a drop of more than 7%.

TD Cowen analyst Andrew Charles told CNBC that he believes the impact of the cyclosporiasis outbreak will be a quarter of the risk to the company, leading to a rapid recovery. He said he expects the arc to look similar in both speeds. mcdonalds and wendy’s recovered from separate E. coli outbreaks in 2024 and 2022, respectively.

“Social media only causes more short-term memory loss,” Charles says. “In both cases, the impact was less than a quarter of what it was. It’s a similar setup here.”

He added that the current outbreak is limited to Taco Bell’s toppings, not the meat itself, which is a major product and will likely have a significant impact on consumer behavior. The COVID-19 pandemic has also lessened the impact of food safety concerns across the industry over the past few years, he added.

“We’ll have to wait and see from here,” Charles said.

Evercore ISI analysts wrote in a note Friday that they believe the outbreak will shift from a vendor issue to a supplier issue as the spotlight shifts from Taco Bell to Taylor Farms.

“Our guess is that this food safety issue will fade from the headlines in the coming weeks, and for as long as it remains, the problem will be particularly focused on suppliers rather than Taco Bell,” the analysts wrote.

While weak demand in affected Midwestern states is likely to last longer than in other parts of the U.S., Evercore analysts said Taco Bell could return to positive same-store sales growth within weeks, just as McDonald’s recovered within about six weeks in 2024. This is especially true as the company has been “running on all cylinders” with strong sales recently, he added.

“The historical strategy of food safety fears, with no confirmed brand-level link and no fatalities, suggests a trend toward a 1-2 quarter demand air pocket and inventory recovery within two quarters,” the analysts wrote.

Jerry Chiaro, an associate professor of marketing at Northwestern University, said this holds lessons in marketing and brand loyalty for Taco Bell and other restaurants. The company will need to win back customer trust, just as other restaurants like McDonald’s, Wendy’s and Chipotle have had to do in the past following health scares.

“They have to take responsibility for that. They can’t blame anyone, even though they are in some ways victims of supplier policies and processes and food safety practices,” Chiaro told CNBC. “But you can’t blame them for that, because customers see Taco Bell as a brand, and Taco Bell is something they associate with.”

Chiaro said this strategy is becoming more common because health scares like cyclosporiasis outbreaks occur frequently and are par for the course in restaurants that serve fresh food. And since Taco Bell has already issued a statement and removed infected food, Chiaro said it is likely to follow other companies’ recovery trends.

“Very clear, accountable and transparent communication, a recommitment to our health safety and food safety processes can make them better,” he said.