Ay, caramba.
The three-month federal health official quest to root out the source of a pesky salmonella outbreak has unearthed a tainted jalapeno pepper in a Texan distribution plant. With at least 1,251 people infected since the strain surfaced back in April, the hunt for answers, initially centered on tomatoes, is now focusing upon the spicy peppers.
Processed, cooked, or pickled jalapenos are fine, but consumers are being alerted to avoid fresh ones used in salsa. As you can probably imagine, this is bad news for Mexican quick-service chains like Chipotle Mexican Grill (NYSE:CMG) (NYSE:CMG-B), Qdoba parent Jack in the Box (NYSE:JBX), CKE's (NYSE:CKR) Green Burrito, and even Taco Bell's Yum! Brands (NYSE:YUM).
It’s also potentially a scare for the casual dining players with Mexican concepts such as Real Mex Restaurants, Brinker's (NYSE:EAT) On the Border, and the multiconcept operator Mexican Restaurants (NASDAQ:CASA).
Even if the chains go the extra mile to verify that their peppers are clean, consumers are likely to tiptoe around the niche altogether until the coast is clear. Why take the chance? Uninformed diners may even take Brinker's Chili's to task for its moniker and logo. Really.
Naturally this isn't the kind of news that Chipotle wants as it heads toward tomorrow's quarterly earnings report. As a bellwether, Chipotle has smoked past Wall Street's estimates in nine of its first 10 quarters as a public company. Make sure you check out Chipotle's report to get not only a read on the past, but also to learn how comps are faring during the current quarter.
The bright side here is that consumers have short memories. Tainted and tampered brands do bounce back. Tylenol. Odwalla. Jack in the Box -- the strong survive. Now that the FDA has identified what may be the culprit, we're actually that much closer to "pass the salsa" celebrations.
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