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.

“I know there’s been a lot of discussion and dialogue [about] are we taking business from Qdoba and Chipotle, but that’s never been my objective,” he says. “I just think what [Cantina’s] doing is broadening the appeal of Taco Bell, and we do know that Cantina does well in markets where there are Chipotles and Qdobas. That doesn’t mean we’re taking share off them; it just means that in those markets, customers realize they’ve got a choice.”

While priorities, DLT and Cantina Bell aren’t the only menu developments Taco Bell has in the works. The brand is expanding its snacking and beverage platforms (seen through initiatives like its Happier Hour promotion this summer, which offered $1 Loaded Grillers, Freezes, Baja Blasts, and other beverages from 2 to 5 p.m. every day), as well as innovation in the breakfast daypart.

The brand also plans to make at least 20 percent of its menu compliant with government-approved fat- and calorie-content guidelines by 2020. Creed says Taco Bell is in the process of developing a new range of healthy products he believes “will catapult us into a new place and again make us more relevant and make us better.” The items will begin testing later this year or in early 2014.

In addition, the chain plans to redefine value with the new $1 Cravings menu, which is being tested in Sacramento, California, and Kansas City, Missouri. It features 12 menu items for $1 each, including products like the Shredded Chicken Mini Quesadilla, Beefy Cheesy Burrito, Caramel Apple Empanada, and Triple Layer Nachos. Should the tests prove fruitful, the menu will roll out nationwide at a yet-to-be-determined date.

Though certainly a good value, Niccol hesitates to call the $1 Cravings menu a “value menu.” No matter where a customer chooses to access the brand, whether it’s on the Cantina or $1 Cravings end, he says, he wants them to walk away getting more than what they paid for.

“The whole entire menu should be a great value. That’s who Taco Bell is,” he says. “What is great value at a dollar? It’s the $1 Cravings menu. What is great value at five bucks? I think it’s Cantina. For $5, you will not find that quality of food with those fresh ingredients anywhere for that price.”

But Kincheloe says the varying menus, platforms, and price points can seem conflicting and confusing to customers, failing to create a single brand image when it comes to value. On one hand, the chain is pushing a new, premium product and image with the Cantina line, he says. “And then they turn around and just go back into their old roots, which is cheap check averages. You’re conflicting, and it’s not going to get that overall long-term perception of value.”

However, Creed says, having both a dollar menu and the higher-end Cantina options all at once is compatible with the brand’s idea of “living mas” and providing “mas choices.”

“We’re giving people choices. In some cases, we’re giving different people choices and sometimes we’ve giving the same people different choices at different times,” he says.

Despite all of the choices, changes, and enhancements taking place at the brand over the last couple of years, Creed is the first to admit that consumer perception of the brand’s food quality and value isn’t in line with reality.

“There’s still a bit of a hangover of this sort of cheap Taco Bell versus the valuable Taco Bell,” he says. Fortunately, with the help of Cantina, Taco Bell is slowly shedding its cheap, low-quality Mexican eats image.

“It’s just a slow build,” he says. “Us telling them that the quality is better isn’t going to change their opinions. Them coming in, trying it, having a great experience, saying, ‘Wow, I just don’t believe it,’ and then believing it—that’s the true test.”

But good value and premium products aren’t the only things creating a positive consumer perception of the brand. The culture Creed has helped create since joining the brand as chief marketing officer in 2001—one that revolves around emphasizing authentic engagement with guests; being a leader in the market; and creating a positive and supportive environment for franchisees, managers, and employees—has made a difference, too.

Niccol says this last component is the launching pad for all of the brand’s success, both today and going forward.

“If we’re going to be an authentic brand, the first place we have to be authentic is with our team members, because the customer experience will never exceed the team-member experience,” he says. “If we’ve got a strong belief in [our operators and managers], they’ll have a strong belief in the people working in the restaurant, which then translates into our customers.”

But while building the brand and culture over time, Taco Bell will continue to place a major focus on making sales overnight—an approach that’s paying off.

The brand brought in sales of nearly $7.5 billion in 2012, with an AUV of close to $1.4 million, a same-store sales increase of 8 percent, and an additional 25 units.

But that doesn’t scratch the surface of what Creed hopes to do with the company in 10 years’ time: He plans to double the size of the brand, creating a $14 billion fast-food juggernaut. Not only will it add 2,000 units in the next decade, but Taco Bell will also aim to raise existing units’ AUV to $1.8 million.

“One of the really good consequences of that is we’ll need to hire another 100,000 employees in the next 10 years at Taco Bell,” Creed says. This means not only front-line employees, but also general managers and area coaches. The company has already begun putting training programs in place to develop general managers and prepare them to take on larger roles within the brand. “This isn’t about how to make a taco faster,” Creed says. “This is about how to make them better leaders and emotionally connect to the brand.”

And while Creed and Niccol say adding 100,000 employees is the biggest challenge the brand will face in the upcoming decade, they won’t settle for team members who don’t believe in or exemplify the Taco Bell culture.

“I don’t want to relax the culture so I can go hire the 100,000 people,” Niccol says. “I want to make sure the 100,000 people believe in the mission as much as the current 150,000 do.”

In the end, Niccol says, achieving this lofty goal comes down to engagement, both with employees and the brand’s customers.

“It’s all about authentically engaging our brand so that the stores are busy today, but we’re also getting people to not just buy Taco Bell, but buy into the brand,” he says. “Because when they’re buying into the brand, they’re actually buying into the culture. They’re buying into our experience, and they’re ultimately buying into this idea of living mas.”/p>