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The surprise lettuce crisis cost Olive Garden’s owner as much as $5 million in 3 months

olive gardenDespite growing sales, Olive Garden hasn’t been immune to rising costs.

Steve Helber/AP Photo

  • Olive Garden has lost nearly $5 million in the space of three months, its parent firm’s chief financial officer said.
  • The company is contending with crop disease in California, which is plaguing most US supply.
  • Chick-Fil-A and Taco Bell previously warned customers to expect shortages of the crop.

Olive Garden’s parent company has been hit by a “surprise” lettuce crunch which cost as much as $5 million in the three months to November 27.

At its quarterly analyst call for its fiscal Q2 2023, Darden Restaurants chief financial officer Raj Vennam estimated that issues with lettuce production cost between $4 million to $5 million. The company owns Olive Garden in addition to Longhorn Steakhouse and Cheddar’s Scratch Kitchen.

Darden has faced mounting costs this year, with Vennam saying costs are up 20% for chicken and dairy year on year.

The hit from rising prices for lettuce — a bedrock of Olive Garden’s never-ending salad — was a shock. 

“While we did not experience the same level of inflation as the general market, it was a big surprise. It was, call it, $4 million to $5 million impact in the quarter, that’s meaningful,” Vennam said. 

The spike represents a small fraction of the company’s nearly $2.5 billion in sales in the same period.

Darden raised prices by 6.5% in the last quarter to offset some of its mounting costs, and managed to grow sales at by 9.4%, beating analyst expectations.

The company hasn’t been alone in facing a pinch on lettuce.

Crop disease in California’s Salinas Valley — known as the world’s salad bowl — has sharply cut production, pushing prices as high as $11 a head at grocery stores. Non-seasonally adjusted inflation for lettuce was almost 20% in the year through November, according to the Bureau for Labor Statistics.

Taco Bell and Chick-Fil-A also warned customers in November about a potential lettuce shortage. 

Read the original article on Business Insider