Chihuahua gets muzzled as Taco Bell pushes value

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The chihuahua has lost its bite.

Still stinging from the resounding failure of its summer tie-in with the hugely hyped "Star Wars," Taco Bell Corp. will return to its value roots in 2000.

The chain, trying to recover from a disappointing year, will downplay its spokesdog in favor of marketing that squarely targets its core customer: young males with big appetites who visit fast-food joints several times a week.


New products at low prices will dominate national advertising, with the 2-year-old chihuahua making only cameo appearances. According to industry observers, a price of 99› is expected to be a frequent feature in national advertising, while day-of-the-week specials at even lower prices are on the menu to respond to local value wars.

The moves are seen as positive, said Lehman Bros. analyst Mitchell Speiser.

"They are going back to their roots, and that should be positive for the brand," he said. "It's just a matter of targeting the fast-food user, and they haven't been doing that. The fast-food user does want quality, but they also want more value."


The 7,000-unit restaurant chain's recently tweaked tagline, "Grande taste. Loco prices. Taco Bell," is expected to stay. Gone are efforts to boost business by attracting moms following the lackluster performance of a new dinnertime family pack called Grande Meals.

"They know they had a mediocre year," said one longtime Taco Bell franchisee, who added he's optimistic about the new tactics. "Everybody knows the dog, but it didn't sell product. If we were selling chihuahuas, it would be different," he said.

Big movie tie-in deals also are unlikely for now, the franchisee added.

"Almost every fast-food chain at some point in its growth and development loses focus and sight of the ball," he said. "We put so much emphasis on the success of the `Star Wars' deal, and that was a disappointment."

Same-store sales at Taco Bell fell 3% for the quarter ended Sept. 4, which included the chain's promotional link with "Episode I-The Phantom Menace." Fourth-quarter sales have ticked up slightly since then but are expected to be flat for the fourth quarter, analysts said.


Taco Bell's agency relationship is solid despite the disappointments, observers said.

TBWA/Chiat/Day, Playa del Rey, Calif., handles creative for the estimated $200 million account of the No. 3 fast-feeder, trailing McDonald's Corp. and Burger King Corp.

It's unclear how the effort to target the core customer will affect a New Orleans store-design test to make Taco Bell outlets look more like those of Starbucks Coffee Co. (AA, July 19). That project, handled by Landor Associates, San Francisco, was designed both to upgrade Taco Bell's image and lure a wider customer base.

Taco Bell parent Tricon Global Restaurants disclosed some of its turnaround plans for the chain in a recent meeting with Wall Street analysts. The session followed news that Tricon President David Novak, a PepsiCo marketing veteran, will become CEO on Jan. 1, succeeding Andrall Pearson, 74, who remains chairman.

Mr. Novak, 47, is the former president of siblings KFC and Pizza Hut. Taco Bell is the only chain in the troika he hasn't had a direct hand in leading.

More products such as this fall's Chalupa, a fried taco, are slated for next year as part of the biggest new-product effort at the chain in recent memory. A super-size taco and burrito, popular items at regional Mexican chains such as Del Taco, may also appear, an attendee at the analysts meeting said.

So far, the Chalupa is a hit, thanks in part to the fact it adds a deep-fried item to the menu. That filled a surprising gap in the chain's lineup, observers said.

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