Executive Insights | June 2011 | By Sam Oches

Bell on the Ball

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“That’s like saying Hyundai competes with BMW,” Creed says. “If you take the Hyundai analogy, they’ve got the Genesis, which I understand is a world-class car and every bit as good as a 5 Series. I think with our quality value and some of the work we’re doing on our menu, I do believe we can offer that sort of quality [as Chipotle].

“But I’m not going to pretend that we’re going to turn the brand into BMW—I don’t want to turn the brand into BMW. Hyundai sells a whole lot more cars than BMW does.”

Anyone surprised to discover that an Australian man is heading a California company that sells Mexican food would not be the first, but Creed’s pedigree suggests he’s certainly fit for the job. Previously the chief marketing officer of KFC Australia for seven years, Creed joined Taco Bell as chief marketing officer in 2001. He was promoted to COO in 2005 and in 2006 became president and chief concept officer of the brand.

Creed took the title of CEO of Taco Bell earlier this year, ready to grapple with whatever challenges came the brand’s way.

And a challenge he got—in fact, it was a CEO’s worst nightmare.

In January, Montgomery, Alabama–based law firm Beasley Allen Crow Methvin Portis & Miles PC filed a class-action lawsuit against Taco Bell, claiming the company was misleading customers by telling them its ground beef was, well, beef. The lawsuit said Taco Bell’s meat contained only 36 percent USDA-inspected beef, which was below the legal limits of what could be called beef.

After the lawsuit went public, gaining global media attention, Taco Bell did what any company facing a legal threat that could potentially derail its reputation would do—it took out ads in The New York Times, Wall Street Journal, and other newspapers across the country thanking Beasley Allen for the lawsuit.

Wait, what?

“I have total faith and confidence in the food that we sell, and I know what’s in our recipes, and I know we’re right, I know they’re wrong, and therefore I am going to defend the reputation of this brand,” Creed says. “It’s really that simple.”

Indeed, Taco Bell did not take the lawsuit sitting down; the company immediately went public with the fact that its ground beef is 88 percent USDA-certified beef and 12 percent seasonings, water, and other ingredients that Creed says are Taco Bell’s “secret,” but which he revealed in a YouTube video. The company also rolled out a multimillion-dollar TV campaign that featured real employees talking about Taco Bell’s beef.

To thank fans for their support through the ordeal, Taco Bell gave away free tacos to its Facebook fans, pledging up to 10 million free tacos.

The response to the lawsuit seemed to work, according to branding and loyalty firm YouGov. The firm’s BrandIndex tracks negative or positive things consumers hear about a company, on a scale of -100 to 100, with zero being neither positive nor negative. Taco Bell’s “buzz score” went from 19.1 on January 3 to -10.6 on February 7. However, by March 15, the company’s buzz score was up again to 9.8.

Creed, who notes the law firm only needed to call Taco Bell to find out the truth about its beef, says he never once considered sitting back and letting the issue blow over.

“There’s a lot of people’s lives that are on the line,” he says. “We have 130,000 people who work at Taco Bell, we’ve got a lot of franchisees, there’s a lot of people whose lives are caught up in this, and I think when people go about making these sort of allegations, it’s not just a plaintiff’s law firm suing a big company; there are people’s lives and there are jobs and there is income and all this stuff at stake.”

“You have to defend the brand as aggressively as you would defend your own personal reputation.”

The suit against Taco Bell was dropped in April.

As for the lessons Taco Bell will carry into the future after the beef debacle, Creed says the brand just needs to keep being the same Taco Bell customers have come to expect.

“The lesson is clearly you have to have your facts,” he says. “You have to know what the brand stands for. You have to respond in the brand voice. And you have to do it as aggressively as you would defend your own personal reputation. I would like to think that we check the box on all of those things.”

With the beef behind them, Creed says, Taco Bell is focusing on future growth, especially domestically. While its Yum counterparts Pizza Hut and KFC are going gangbusters overseas—especially in China, where KFC has 3,400 outlets—Taco Bell is focusing its efforts on the U.S. The brand has just more than 200 international stores, but nearly 6,000 domestic. Creed says the company will upgrade U.S. stores with new furniture packages, free WiFi access, and more power outlets to welcome customers to stick around.

Taco Bell is also riding the healthy-eating wave; after finding success with its Drive-Thru Diet and Fresco menus in 2010, the company has turned its attention to lowering sodium.

“By the end of 2011, we will have a 33 percent reduction in sodium content across our entire menu in less than three years, which means we will be selling 1.5 million pounds less sodium per year,” Creed says.

“We’re evolving—it is a process. Sodium is not like trans fat—you can’t rip all the sodium out like you could change from one oil to another. You’ve really got to wean the customers off some of these tastes and flavors, and our team has done a really fantastic job,” he says. “I’m not hearing about anyone else that’s at the level of sodium reduction that we are.”

But don’t tell anyone we told you—Creed says the company isn’t “tooting its own horn” about the sodium focus.

“Does that make us perfect? No, it doesn’t make us perfect,” he says. “But have we been able to do this without changing the taste? Absolutely. In my mind, we can deliver great, distinctive taste, it’s not costing us or our customers any more, and yet there is a million and a half pounds less sodium, I think that’s a big win.”

And for a company that just six months ago was facing potentially catastrophic damage to its reputation, a big win is a big sigh of relief.

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