Taco Bell lettuce outbreak rattles stocks, but analysts see quick rebound
The CDC linked a cyclosporiasis outbreak to shredded iceberg lettuce at Taco Bell restaurants in five states, with more than 1,600 people affected.
By Frankie Delgado · News Reporter
3 min read
A cyclosporiasis outbreak tied to shredded iceberg lettuce at some Taco Bell restaurants has sickened more than 1,600 people across five states, according to the Centers for Disease Control and Prevention.
The CDC said Thursday that its investigation linked the outbreak to lettuce served at Taco Bell locations in Indiana, Kentucky, Michigan, Ohio and West Virginia. The agency said no deaths have been reported.
Cyclosporiasis is caused by a parasite and can resemble a severe stomach illness, the CDC says. Symptoms often appear two to three weeks after infection.
The Food and Drug Administration is working with the supplier to determine whether the lettuce was distributed beyond the Taco Bell restaurants identified by health officials, according to CNBC.
Taco Bell said in a Thursday statement that it was voluntarily removing potentially affected lettuce from a supplier in select states. The chain said the ingredient would be taken out of its national supply chain indefinitely and replaced within 24 hours in select states.
The health scare has also hit Wall Street. CNBC reported that Yum Brands, Taco Bell’s parent company, fell nearly 7% over five days as investors reacted to the outbreak.
Other restaurant stocks that investors associated with fresh lettuce also slid during the week. Sweetgreen dropped nearly 13%, while Cava fell more than 3%, CNBC reported. Both bounced Friday after the CDC did not identify their ingredients as possible sources, with Sweetgreen up more than 17% and Cava rising about 2%.
Supplier scrutiny grows
Reports from The New York Times said the lettuce used by Taco Bell may be linked to Taylor Farms, a supplier that distributes to many restaurant chains and also sells products in grocery stores. Bloomberg reported that Taylor Farms was preparing a recall of ingredients Friday.
Taylor Farms was also connected to a 2024 McDonald’s E. coli outbreak, according to the FDA. The company did not respond to CNBC’s request for comment.
Sweetgreen said this week that it did not believe any of its ingredients were involved in the outbreak. The chain said it does not use iceberg lettuce on its menu and had been checking with suppliers during the investigation.
Chipotle said Friday that it does not serve shredded iceberg lettuce and does not believe its ingredients are connected to the outbreak, according to CNBC.
Analysts expect a short hit
Analysts told CNBC they do not expect the outbreak to leave a lasting mark on Yum Brands’ stock, based on how other restaurant chains recovered from past food safety incidents.
Placer.ai data cited by CNBC showed that foot traffic fell over the past week at chains serving fresh lettuce. Taco Bell traffic was down nearly 6%, while Panera Bread was down more than 7%.
TD Cowen analyst Andrew Charles told CNBC he expects the outbreak to pose a risk for one quarter and then ease, similar to McDonald’s and Wendy’s after separate E. coli outbreaks in 2024 and 2022. Charles said the issue involves toppings rather than meat, which he said would likely have a stronger effect on customer behavior.
Evercore ISI analysts wrote Friday that they expect attention to shift from Taco Bell toward the supplier. They said Taco Bell could return to positive same-store sales growth within weeks, pointing to McDonald’s recovery in roughly six weeks after its 2024 incident.
Gerry Chiaro, an associate professor of marketing at Northwestern University, told CNBC that Taco Bell still has to win back customer trust because diners connect the problem with the brand they visit, even when the issue may involve a supplier.
This story draws on original reporting from CNBC.