QSR 50 | August 2013 | By Mary Avant

Not Your Parents’ Taco Bell

How Taco Bell is trying to be better and more relevant.

Taco Bell CEO Greg Creed is turning the brand into a premium Mexican chain.
Taco Bell CEO Greg Creed has made it his mission to create a more premium Mexican quick serve. taco bell
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One morning this past May, Taco Bell CEO Greg Creed opened up his copy of USA Today and found a quarter-page story about his brand staring back at him. But it wasn’t a piece about the Cantina Double Steak Quesadilla—launched that month—or even the endlessly buzzing Doritos Locos Tacos.

Instead, it centered on the Waffle Taco, a Taco Bell breakfast creation made of scrambled eggs and a sausage patty tucked into a soft waffle “shell.” Consulting a member of the brand’s social media team, Creed learned that news of the Waffle Taco had made more than 40 million media impressions in the few weeks since its launch.

Good news, of course, but baffling: The Waffle Taco wasn’t a nationwide menu addition or even a limited-time offer. It was a simple product the brand decided to test in just a handful of Southern California stores. “I don’t think I’ve ever seen any product that’s in five restaurants generate 42 million impressions and a quarter page in the USA Today,” Creed says.

The excitement surrounding the Waffle Taco goes to prove how much power the brand possesses. To Creed and his team at Taco Bell, however, it shows how much room they have for innovation.

“Frankly, there’s a lot of dayparts we haven’t even innovated in yet,” says Brian Niccol, who was promoted to president of the brand in May. “I can go redefine breakfast; I think I can still go redefine snacking and, frankly, I think lunch and dinner. Yeah, we’ve had a lot of good innovation, but there are still a lot of things that we’ve got line of sight on that are due for a little redefining. And that’s what gives us the inspiration and motivation: what we can do next.”

Yet the brand isn’t a fan of innovating just for the sake of innovating. In reality, its creations and evolutions are largely—if not wholly—driven by deep insights into customers’ wants and needs, as well as the realization that food has moved from simply fuel for the body to a life experience, Creed says.

Not only is the brand now basing its innovations around creating a food experience, but Creed says the chain is also “maniacally focused” on becoming two things: a better and more relevant Taco Bell. And it’s doing so with a whole lot of help from a pair of the biggest products to ever hit the nearly 5,700-unit chain: Doritos Locos Tacos (dlt) and the Cantina Bell menu.

It’s hard to mention Taco Bell without at least alluding to the wildly popular Nacho Cheese and Cool Ranch DLTs—the “better” component of Creed’s strategy for the brand. And the fact that these two products alone have pulled in more money than some brands do in an entire year—more than $750 million as of May, with more than 500 million tacos sold in about a year and a half—proves it’s a platform that’s both highly lucrative and long-lasting.

Creed doesn’t hesitate to say the DLT is the biggest product innovation to hit the brand in its 51-year history. “Some time in the future, when they go back and write what were the top five [quick-service] ideas, I think Doritos [Locos Tacos] will make the top five,” he says.

But for a brand that’s been fighting to elevate its image to one of a higher-quality concept, many were quick to accuse DLTs of simply reinforcing the old perception of Taco Bell—one of cheap, novelty food. Creed doesn’t buy into that. “What I think people fail to realize is that for the vast majority of Americans, rightfully, Doritos is a quality product,” he says.

And it’s not just a gimmick. “Ultimately, it’s two great brands that are really profitable … and so that just made us a better Taco Bell,” Creed says. “It’s what we would call a fastball down the middle, which is, it tastes great, it’s two big entities, and it’s not like it’s a force fit. People who love Taco Bell eat a lot of Doritos, and people who eat a lot of Doritos eat at Taco Bell.”

In addition to a yet-to-be-launched spicy Flamas flavor, Creed says, the platform has an extended runway for adding shell flavors and switching up ingredients inside the shell. “At the moment, what we’ve done is introduce these different flavored shells, but the ingredients inside have been the same—ground beef, sour cream, lettuce, tomatoes,” he says. “We’re going to go back now and say, ‘What would make sense within the Taco Bell menu and all of our ingredients to put inside a Nacho Cheese Doritos [taco]? What would make sense within a Cool Ranch Doritos [taco]?”

As for doubters who say fans will quickly—or at least eventually—tire of the endless DLT options, Creed says: “Doritos has been around for a long, long time and no one seems to be tiring of Doritos. And Taco Bell’s been around for 51 years and no one seems to be tiring of it. So the fact that the Nacho Cheese is still selling incredibly well and that Cool Ranch came in and sold incredibly well, … I’m confident that this is incremental business. It’s not just trading off one flavor for another.”

Though the DLT cemented Taco Bell’s reputation as an innovative-product powerhouse, Niccol and the Taco Bell team found they were still losing touch with a portion of past consumers. “If you get into your 30s or 40s, as much as you still have a love of Taco Bell, what I was hearing a lot of people say was, ‘I used to,’” he says. “And I wanted to change that vocabulary from, ‘I used to,’ to, ‘This is what I get at Taco Bell now.’”

Enter the Cantina Bell menu, the piece of the puzzle meant to make Taco Bell more relevant to today’s sophisticated consumers. Crafted in conjunction with celebrity chef Lorena Garcia of “Top Chef Masters” fame, the menu features bowls, burritos, and quesadillas made with whole black beans, cilantro rice, citrus-and-herb marinated chicken, steak, and other high-quality ingredients.

Creed says the Cantina Steak Burrito, launched in February, helped push the brand to a strong first quarter in 2013, in which it posted a 6 percent increase in same-store sales. A Double Steak Quesadilla launched in May, and fajitas are now being tested in select markets.

The menu has been yet another cash cow for the brand, Creed says. “Everyone’s giving a lot of credit to the Cool Ranch launch [in March] for our great first quarter, but Cool Ranch was only three weeks of the quarter,” he says. “It’s not just Doritos that’s doing well for us. Cantina’s doing well for us, too.”

Not only did the menu introduce completely new tastes to the brand, but it’s also helping tap into previously hard-to-reach demographics—women in particular. “People who … may not have been attracted to Taco Bell and that traditional, crave-able taste really felt, ‘Wow, this is different. This is better,’” Creed says of Cantina Bell.

Niccol says the menu also attracts some older and lapsed diners. Though these customers don’t visit as frequently as the concept’s biggest fans, “the fact that they’re back engaged with the brand is a testament to how we’ve made Taco Bell more relevant,” he says.

“Our core business is still the 20-something male, but we have broadened the shoulders of the brand. But by no means are some of these lapsed users and older, higher-income people replacing [regular customers],” Niccol says. “They’re truly just in addition to our traditional value guys that have always been in the DNA of the brand.”

Naturally, with new customers and the new Cantina line comes the question of new competition, especially with fast-casual Mexican mainstays like Chipotle and Qdoba.

At the moment, though, the brand’s major competition doesn’t come on a national stage, but from regional competitors like Taco Bueno in the Midwest and Taco Cabana on the West Coast, says David Kincheloe, president of National Restaurant Consultants. “You’ll still get those few people that may jump from Chipotle to Taco Bell, but I think it’s really those regional competitors that offer a little bit better perceived product,” he says. “It’s going to be tough for [Taco Bell] with their history to compete with Chipotle.”

That’s not a problem for Taco Bell; Chipotle and Qdoba aren’t the type of competitors the brand is going after anyway, Creed says.