Demand shock sends lettuce prices to record drop as chains suffer
A record plunge in lettuce prices driven by a cyclospora outbreak is inflicting sales damage on fast-casual restaurant chains despite offering marginal relief from summer inflation highs.
Lettuce prices tumbled 16.4% in July, marking the largest single-month decline on record, according to seasonally adjusted Bureau of Labor Statistics data released Wednesday. The drop drove the sharpest deflation within the consumer price index's food category, which overall ticked up 0.1%.
The record deflation reflects a demand shock rather than a supply glut. A multistate cyclospora outbreak has sickened thousands, destroying consumer appetite. Despite the July plunge, lettuce prices remain roughly 7.5% higher than a year ago, more than double the broader CPI basket's pace.
"It's very likely due to the cyclospora outbreak and consumers just not wanting to buy lettuce right now," said Jeremy Horpedahl, an associate economics professor at the University of Central Arkansas. Dollar sales of prepackaged salads plunged 14% in the four weeks ending July 25 compared to a year earlier, NielsenIQ data shows.
The food safety crisis is translating into immediate financial pain for restaurant operators heavily reliant on fresh produce. The fallout has been uneven across the sector. Sweetgreen absorbed a direct hit, citing reduced demand that prompted the salad chain to lower its full-year outlook and triggered a sell-off in its shares.
Cava also reported "broader consumer concerns" around fresh produce that dented late second-quarter sales. However, CEO Brett Schulman noted that sales trends have started to rebound. Larger chains proved somewhat more resilient but could not escape unscathed.
Yum Brands CEO Chris Turner noted a "meaningful near-term sales impact" at Taco Bell, which the FDA initially connected to the contaminated lettuce. Chipotle reported a roughly 2 percentage point sales drag in late July, though executives stressed their supply was unaffected and their food safety program was "very robust."
The FDA traced the outbreak to iceberg lettuce processed at a Taylor Farms facility in central Mexico, prompting a voluntary recall. Prior to the crisis, lettuce prices had surged to all-time highs this summer, fueled by elevated fertilizer costs linked to the Iran war and increased farm labor expenses following Trump administration deportations.
The sudden price drop closely mirrors the egg market's recent boom-and-bust cycle. "Consumers are not going to rush out and buy this now just because it's cheaper," Horpedahl said. "It's fallen because nobody wants it."
