Dive Brief:
- Taco Bell believes its sales hit due to the ongoing cyclosporiasis outbreak will be short-lived, Yum Brands CEO Chris Turner said Thursday on the company’s Q2 earnings call.
- Taco Bell has seen a 2% same-store sales decline in the third quarter to date as a result of the epidemic of the parasitic diarrheal illness, with considerable improvements since mid-July, Yum Brands Chief Financial Officer Ranjith Roy said.
- The chain has benefited from shifting consumer awareness around the epidemic, which Turner said was an industry-wide rather than brand-specific health issue.
Dive Insight:
Taco Bell U.S. posted 7% same-store sales gains in the last full quarter before the cyclosporiasis epidemic, which prompted some stores to temporarily remove ingredients like lettuce, according to Yum’s earnings release. For Taco Bell, the worst sales hit came the weekend of July 18, just after the chain announced it was pulling potentially contaminated lettuce from stores.
Since then, “sales declines have moderated materially, and we are seeing steady improvement in day-over-day sales trends,” Roy said.
The FDA and CDC have tied the outbreak to lettuce from Taylor Farms, including shredded lettuce from the supplier served at Taco Bell restaurants in at least nine states. The CDC is also investigating case clusters unrelated to the Taco Bell outbreak — which has sickened at least 1,947 people — as national confirmed and suspected cyclosporiasis cases near 20,000. The extent of the epidemic makes it likely that consumers have been sickened by produce from sources other than Taco Bell.
“We've seen real improvement as consumers have understood better the nature of the issue, and they understand that it is not a Taco Bell-specific issue,” Turner said.
The removal of the lettuce and communication with consumers about the outbreak helped reinforce trust in Taco Bell, Turner said, claiming that measures of social sentiment have already recovered. By some measures — Turner did not specify which — consumers’ positive feelings about the brand are higher than before the outbreak.
After removing the lettuce, Turner said, the chain turned to its “magic formula” of digital engagement, value plays and buzzy drops to regain sales momentum.
Taco Bell gives rewards members weekly offers called Tuesday drops. Its most recent offers in that program, a $1 Enchirito and $1 Mexican Pizza, were the highest performing Tuesday drops in the chain’s history, Turner said.
Structurally, the chain is in a good position to recover from the outbreak thanks to its digital engagement, menu innovation and value offerings, Turner said.
