Taco Bell Turning up the Heat in China

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In China, Taco Bell will serve its food at hotter temperatures than in its American locations.
In China, Taco Bell will serve its food at hotter temperatures than in its American locations.  Credit: Akio Kon/Bloomberg

Taco Bell, which is making a return to China this year, is betting that the country wants quesadillas and tacos made with warm nacho-cheese sauce.

The chain is adjusting its menu to meet local tastes, and that includes having the food be hotter when it arrives, said Shivram Vaideeswaran, the brand's global marketing and innovation director. Americans may be more forgiving than the Chinese about the temperature of their food, and the warm nacho-cheese approach hasn't been tried before, he said. In the U.S., crunchy tacos are made with cheddar cheese -- typically room-temperature -- while quesadillas have a three-cheese blend.

"Having food that's incredibly warm is very important in Chinese culture," Mr. Vaideeswaran said in an interview on Thursday. "It's warm, it's melty, and it's really good."

Taco Bell's latest push into the Asian country should come in late December, Mr. Vaideeswaran said, making it an early test of the company's plan to split off its Chinese operations. But the opening could slip until next year, he said.

Taco Bell's owner, Yum! Brands, expects to complete the spinoff of its business in China by the end of this month. The new company, Yum China Holdings, will pay a licensing fee to operate KFC, Pizza Hut and Taco Bell in the nation.

Unlike Taco Bell, KFC and Pizza Hut are already well-established in the country. Yum China plans to expand by ramping up delivery and trying to entice more consumers to join loyalty programs.

For Taco Bell, going big overseas is a more recent phenomenon -- but the chain is committed to expanding quickly. Earlier this week, Yum executives said that the Mexican-themed chain can have $15 billion in systemwide sales by 2022, up from more than $9 billion currently. The chain is adding stores in Brazil, Colombia, Spain, India and Canada as well.

This isn't Taco Bell's first push into China. The chain opened locations in the country in China in 2003, but that expansion didn't take off. The company hopes the latest attempt is different. The new restaurant will be located in Shanghai, the country's largest city.

Ivan Feinseth, partner and chief investment officer at Tigress Financial Partners, also sees Yum having more success this time around.

"The company is getting brand acceptance with the help of social media," he said. "Also, the menu is more geared to the Chinese consumer. We are very bullish on Yum."

Nacho cheese, of course, isn't part of Chinese culture. But the Tex-Mex favorite was seen as a way to make Taco Bell more palatable to locals, Mr. Vaideeswaran said. The approach was honed through focus groups in the country, he said.

A tepid taco -- which might be fine for Taco Bell's American clientele -- wouldn't fly in China.

"A lot of food is not really served cold," he said. The warm nacho cheese is a way to "layer in that local relevance."

-- Bloomberg News

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