(Bloomberg) -- This summer’s cyclospora outbreak left many Americans wary of eating leafy greens. That’s bad news for salad dressing.
Sales of Kraft Heinz Co.’s salad dressings fell 20% in the last four weeks, while the Clorox Co.’s Hidden Valley Ranch dressing fell 5%, cutting into the sales and social media boost it saw during the World Cup, TD Cowen analyst Robert Moskow wrote in a note Tuesday, citing Nielsen data. Salad dressing represents 2% of Kraft Heinz’s US retail sales and 11% of Clorox’s, he said.
Consumers have curbed their consumption of leafy greens and salads this summer after thousands across the US developed cyclosporiasis, the gastrointestinal illness caused by eating food contaminated with feces. State and federal health officials linked an initial large cluster of infections in the Midwest to iceberg lettuce eaten at Taco Bell locations, sourced from central Mexican farms operated by Taylor Farms.
Many consumers were confused by information about what was safe to eat and opted to avoid salads entirely, even after health officials in Michigan said people could resume normal consumption of leafy greens. Sales of iceberg lettuce were down 20% in the last four weeks, compared with a 5% increase in the last 12 weeks, Moskow noted. Iceberg lettuce represents about 37% of the $2.6 billion lettuce category, he said.
Sweetgreen Inc. cut its annual outlook this month to reflect lower demand for fresh prepared foods, and Cava Group Inc.’s sales slowed in mid-July when consumers became aware of the outbreak, though it said trends have been improving.
“We expect consumers’ trust in the industry to gradually improve and sales to recover,” Moskow wrote in his note. “That said, the negative impact to Kraft Heinz and Clorox’s salad dressing brands may prove meaningful in the current quarter.”
If the declines in salad dressing continued for the rest of the third calendar quarter, they would represent a 55 basis points drag on Clorox’s US retail sales and 40 basis points to Kraft Heinz’s, he said.
Consumers leery of fresh leafy greens have made swaps for some frozen ones instead. Frozen kale has gotten the biggest lift, with sales up 14% in the three weeks ending Aug. 1, compared with a year ago, according to NielsenIQ. Frozen spinach, raspberries and blueberries all saw growing sales as well.
“Increased interest in farmers’ markets suggests consumers are also reassessing where they shop,” NielsenIQ wrote in an analysis, as they seek “greater visibility into sourcing and handling.”
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