Taco Bell visits plunge 19% after cyclosporiasis outbreak linked to lettuce

Topline

A cyclospora parasite outbreak suspected to be linked to Taco Bell lettuce has severely impacted the chain's customer traffic, while shares of its parent company, Yum! Brands, have fallen sharply from a five-month high reached earlier this month.

Key Facts

• Taco Bell's customer visits on July 17 were approximately 19% below the chain's average Friday traffic level for the year to date, according to Placer.ai, a location activity tracker, as first reported by Bloomberg.
• The broader fast-food category saw only a 1.9% traffic decline on the same day, meaning Taco Bell's drop was roughly 10 times worse than its peers.
• Shares of Yum! Brands, which also owns KFC, have fallen about 10% since July 10, when news reports first linked the chain to an ongoing outbreak of an "explosive diarrhea parasite," erasing approximately $4.3 billion in market value.
• Over 1,600 cyclosporiasis cases have been attributed by the Centers for Disease Control and Prevention (CDC) to Taco Bell restaurants across five states: Indiana, Kentucky, Michigan, Ohio, and West Virginia.
• The stock decline came days after Yum! Brands hit a five-month high of $167.49 per share on July 7.

What to Watch For

Yum! Brands is scheduled to release its earnings on July 30.

Key Background

More than 7,000 people—most of whom reside in Michigan—are confirmed or suspected to have been sickened with cyclosporiasis, an illness caused by the cyclospora parasite, over the past two months. Federal investigators spent weeks searching for the source before identifying Taco Bell's lettuce supplier as the probable origin.

The Food and Drug Administration (FDA) reported that more than 1,600 of those sickened in the outbreak had eaten at Taco Bell restaurants, and pointed to Taylor Farms' shredded lettuce as the culprit. However, on Sunday, the agency backtracked, stating that a test of the brand's lettuce for the cyclospora parasite had returned a false positive. The FDA did not fully clear Taylor Farms, and the supply chain evidence remains, but as of Monday, no produced samples have tested positive for the parasite.

Cyclospora outbreaks are notoriously difficult to trace because the parasite is hard to detect—finding it has been compared to "a needle in a haystack." The CDC expects cases to rise through the end of August.

Surprising Fact

Yum! Brands, Sweetgreen, and major McDonald's franchisee Arcos Dorados warned investors about cyclosporiasis in recent Securities and Exchange Commission filings. Each company explicitly named the illness as a material business risk and cautioned that fresh, raw leafy greens handled at its restaurants were vulnerable to the parasite.

Further Reading

• Forbes: Here's Where The Cyclosporiasis Outbreak Stands After Taylor Farms' False Positive — By Mary Whitfill Roeloffs
• Forbes: Taco Bell Warned Investors About Cyclosporiasis Before The Outbreak—And These Other Chains Did Too — By Mary Whitfill Roeloffs
• Forbes: Cyclosporiasis Theories Are Spreading Online. Here's What's True. — By Mary Whitfill Roeloffs