Taco Bell Stumbles on a Lettuce Crisis

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A Chinese AI company is releasing an open source model that could challenge AI giants in the US.

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I would call this deep seek part two, except I think, frankly, the threat is even bigger this time.

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Plus, how big a problem is the contaminated lettuce outbreak for Taco Bell? And what to watch for when a team of maestros take on the comeback kings during Sunday's World Cup final. It's Friday, July 17th. I'm Alex Ossola for the Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that move the world today.

Taco Bell for years has grown sales faster than other fast food chains in the US thanks to new menu items like Diablo-dusted crispy chicken nuggets and Mountain Dew Baja Blast Pie.

Now, though, the microscopic parasite Cyclosporiasis could threaten that. Federal health officials have linked the recent outbreak to shredded iceberg lettuce from Taco Bell locations in five states. Heather Haddon covers restaurants for the Journal and joins me now. Heather, how is Taco Bell handling this?

Heather Haddon (1:37)

The company said that it was voluntarily removing potentially impacted lettuce from select restaurants where it believed it could have been tainted to some degree. These cases have actually been popping up since May, but I think we still don't know if this is just a Taco Bell thing or this is many retailers and restaurants things, and that's what we're watching for.

Alex Ossola (2:00)

Taco Bell is sort of dominating the headlines because the link has been publicized by federal health officials. I could certainly see how hearing about this would make me sort of think twice before going to Taco Bell and frankly like eating salad in general, though I will say I had one for lunch, so maybe not that much.

Are we already seeing this have an impact on Taco Bell's business?

Heather Haddon (2:21)

Yes, so some third-party data we got on visits and sales show some preliminary impact. It's not that the sales have actually dropped compared to last year, they're just slowing. This is just a few days in and the visits data also showed some slowing of growth year over year. Yom Brands, which owns Taco Bell, is going to report earnings later this month, but it will not include much of this period. Although, I assume Yom Brands will address this issue.

Alex Ossola (2:50)

Yom Brands recently sold its Pizza Hut chain to a private equity firm. How important is it for Taco Bell to succeed to Yom Brands?

Heather Haddon (2:59)

It's very important. Taco Bell delivers a big chunk of Yom's operating profit and its system-wide sales. It's basically the crown jewel of their portfolio, and now their portfolio is going to be even more concentrated. So they need Taco Bell to keep doing well. When brands experience a food safety issue, it takes time to rebuild, and they have to do a lot to do that. New promotions, new deals, new menu items, more advertising. It is expensive to try to recover from one of these and move on, but brands eventually do. McDonald's did have that equalized issue in late 2024, and it took two quarters for their US. Sames for Sales to turn around, but eventually they did.

Alex Ossola (3:41)

That was WSJ Reporter Heather Haddon. Thank you, Heather.

Heather Haddon (3:44)

Thanks so much.

Alex Ossola (3:45)

Yum's stock dropped 2.8 percent today and almost 10 percent for the week. Also related to the cyclosporiasis outbreak, produce supplier Taylor Fresh Foods is removing iceberg lettuce that's grown in central Mexico from the US market. The company says that none of its other products are affected, and it says that none of its Taylor Farms brand salad kits have iceberg lettuce in them. The outbreak has led to cases in more than 30 states, and more than 90 people have been hospitalized.

Apple briefly edged out NVIDIA today to reclaim its title as the most valuable publicly traded company. But at the day's close, NVIDIA was back on top with a market cap of $4.91 trillion, while Apple was at $4.9 trillion. Stock indexes closed out the week with more losses. The NASDAQ dropped 1.4%, while the S&P ended down 1%.