America’s Deadly Cyclospora Outbreak Is Becoming A Retail Problem

Trust Problem For Retailers

Cyclospora is a water-borne parasite and typically spreads through contaminated produce such as lettuce, onions, berries and fresh herbs. Although public health authorities have pinpointed the source to iceberg lettuce supplied by Taylor Farms de Mexico – and Taylor Farms has recalled the relevant product as the agency continues to investigate – the FDA has advised consumers to take extra steps, like removing outer layers of fruits and vegetables in order to reduce risk.

But not every Cyclospora infection being reported across the U.S. has been linked to iceberg lettuce. The CDC says it is investigating multiple clusters, while the iceberg-lettuce outbreak itself covers 15 states.

The impact has been far reaching. For Yum Brands, the owner of Taco Bell, the initial financial hit was sharp. Taco Bell’s U.S. comparable sales are down 2% so far in the quarter as of July 30, with the biggest impact coming around the middle of last onth. Foot traffic was down 20.8% on July 23 compared with the average for comparable Thursdays earlier in the year, according to Placer.ai.

But Yum CEO Chris Turner said consumers were beginning to understand that the issue was broader than Taco Bell.

“Elevated uncertainty initially weighed on consumer demand,” Turner said. “Since then, consumers have become increasingly aware that this is an industry-wide issue, not an issue specific to Taco Bell.”

Likewise, Sweetgreen does not use iceberg lettuce and says it has no indication from health authorities or suppliers that it is connected to the outbreak. Nevertheless, its July comparable sales were hit by approximately 600 basis points as consumers became more concerned about fresh food.

“Beginning in mid-July, heightened consumer concern related to the recent cyclospora headlines disrupted that momentum,” Sweetgreen CFO Jamie McConnell said.

Traceability Key To Public Reassurance

The industry is not waiting for the investigation to end. Sysco, America’s largest food distributor, has stopped buying iceberg lettuce from Mexico and shifted sourcing to U.S. growers, according to CEO Kevin Hourican, who stressed that Taylor Farms is a “high quality, high integrity shop,” but Sysco nevertheless had to move its sourcing.

As consumers become nervous about industrial supply chains, some are moving toward products they believe they can trace more easily.

Farmers markets and stores supplied by local farms have been reporting sales increases of between 15% and 30% in some markets, while locally grown produce has been seeing stronger demand.

Michigan may have lifted its warning, but fresh lettuce sales have still not recovered nationally and the issue has moved beyond an inconvenient summer food scare.