The United States' largest foodborne illness outbreak in recent years, linked to shredded lettuce served at some Taco Bell eateries, may dent the fast-food chain's sales, but is unlikely to cause any long-lasting damage to the brand, analysts said.
U.S. health officials are investigating the source of the cyclosporiasis outbreak, which has sickened thousands of people in Michigan and four other states. Some reports had initially linked the parasite, Cyclospora, to a Taylor Farms plant in Mexico.
However, Mexico said on Tuesday that there was no evidence yet to suggest that lettuce sourced from it caused the outbreak in the U.S.
Foot traffic at Taco Bell — owned by Yum Brands (YUM.N) — was down 18.9% as of Friday, July 17, compared with the traffic on all Fridays from January 1 through July 6, according to Placer.ai, a company that gathers foot traffic data.
"Wary consumers may temporarily take their appetites elsewhere to sidestep any perceived health risk," said Morningstar analyst Ari Felhandler.
Shares of Yum Brands fell nearly 10% last week after Taco Bell's link to the outbreak emerged. The company is scheduled to report quarterly results as soon as next week.
Analysts and consultants said the outbreak would need to persist for months to materially damage the brand. They pointed to McDonald's (MCD.N), which returned to growth within a few quarters of the 2024 E. coli outbreak linked to one of its most popular menu items.
"They are already making the right moves," said Izzy Kharasch, president of Hospitality Works. "This type of action, in addition to lots of communication to the public, will get them back on track sooner rather than later."
ANALYSTS PREDICT SHORT-TERM IMPACT
The Tex-Mex chain has been a key driver of Yum's growth, outperforming many rivals despite broader weakness in the restaurant industry. A long-term dip in its sales would amount to a big hit in overall revenue.
Chipotle Mexican Grill (CMG.N), for instance, took years to rebuild customer confidence and restore sales after a series of foodborne illness outbreaks in 2015.
David Mayer, senior partner at global brand and design consultancy Lippincott, brushed such concerns aside. "People have very short-term memories," he said. "The most important thing for Taco Bell is that there is no additional food poisoning incident within the next 12 months."
A few Taco Bell customers Reuters spoke with echoed the sentiment.
Firefighter Shai Bialer said he was confident restaurants would quickly discard the affected lettuce because they feared lawsuits. "This is the only fast food I like," Bialer said, as he ate a bean burrito without lettuce at a Taco Bell in West Orange, New Jersey.
Spice distributor Benny Tejeda, who has a standing biweekly Taco Bell date with his father when the pair makes a delivery at a nearby market, said the tradition meant too much to him to skip. Tejeda is skeptical of the seriousness of the outbreak, saying he struggles to trust government agencies like the FDA to disseminate accurate information.
TRANSPARENCY REASSURANCES
Other fast food chains are also protectively communicating with customers.
At a New Jersey Chipotle outlet on Tuesday, Caleb Rinn, 23, said he had forgotten all about the outbreak when he ordered a burrito bowl with lettuce.
Rinn said he is only mildly concerned. "No one has died from this," he said. Then, pausing, he said: "Right?"
