Sales are Going Loco at Taco Bell, Ad Age's Marketer of the Year
Brian Niccol glances around Taco Bell's Irvine, Calif., test kitchen as he ruefully recalls the chain's "food-as-fuel" marketing philosophy before 2012: "Fill them up, move them out." Commercials relied on "crappy humor" to pitch new products to young men. Or, as he referred to one character in a TV spot: "a 24-year-old white guy being an idiot."
"We were letting [the brand] become too much of a punchline," said the Taco Bell president.
Late-night comics were given even more fodder when, in January 2011, a class-action lawsuit was filed that alleged the majority of what Taco Bell called "seasoned beef" was ingredients other than meat. The chain, which had just come off its third year of flat sales, ended 2011 with a 1.4% sales decline systemwide.
But nobody's laughing now. Taco Bell in 2012 posted an 8% increase in U.S. same-store sales -- more than twice the 3.3% gain of industry leader McDonald's -- after the most-successful product launch in the company's 50-year history. It took three years and 45 prototypes to launch Doritos Locos Tacos, which sold 100 million in the product's first 10 weeks. And it's a franchise that keeps on growing.
In March of this year, Taco Bell rolled out Cool Ranch Doritos Locos Tacos and, in August, Fiery Doritos Locos Tacos. Taco Bell has sold more than 600 million of the original and Cool Ranch tacos in the U.S. since the introduction nearly a year and a half ago.
But while the Doritos line and the massive spending behind it made the most obvious contribution to Taco Bell's bottom line, the chain also introduced the Cantina menu, aimed at more health-conscious consumers, and is testing a Power Protein menu and breakfast. It also did major work to refine its marketing messages and invested heavily in social media to appeal to what it sees as its most important customer: millennials.
In February 2012 it jettisoned the tagline "Think outside the bun" for "Live mas," and launched new creative for the brand that was supported with $280 million on measured media last year, according to Ad Age DataCenter, up 12% from 2011. The idea was to position the brand as more of a lifestyle or "experience," said Mr. Niccol, who joined Taco Bell as chief marketing and innovation officer in late 2011 after serving as CMO at Yum Brands sibling Pizza Hut. Chris Brandt, VP-marketing, was named CMO after Mr. Niccol became president of Taco Bell in May.
Taco Bell worked with its longtime agency, Interpublic's DraftFCB, on the launch of "Live mas," which has notably sprinkled some Spanish into the spots to convey authenticity. However, sibling agency Deutsch has been handling the bulk of creative this year, including Taco Bell's reentry into the Super Bowl after a three-year hiatus, and, most recently, creative work for the Fiery Doritos Locos Taco. Mr. Niccol said both DraftFCBand Deutsch continue to work on the brand. MEC is Taco Bell's media agency and Digitas is its digital shop.
To reach its targeted millennial audience, Taco Bell experimented with social media in ways other companies in its category have not. "You have to go to these other screens, because in the end, kids in college dorm rooms don't even have TVs, they're using laptops," said Mr. Niccol. Leading the social-media charge is Tressie Lieberman, director-digital marketing and platforms, who was recruited by Mr. Niccol in January 2012 from Pizza Hut. Ms. Lieberman looks beyond the usual suspects like Facebook and Twitter, turning to Vine and Pheed, and using Snapchat, a social-media app that sends ephemeral photo messages, to announce the limited-time return of its popular Beefy Crunch Burrito. She's also used social media to give followers sneak peeks at products like the Doritos Locos Tacos before they're available, an effort to "let them know they're special."
Despite the social-media push, Mr. Niccol said the overall media mix hasn't changed dramatically. Taco Bell, he said, spends 70% of its budget on proven media like TV, 20% on newer media such as digital, and 10% on media where "we can go explore."
Taco Bell knows it must move beyond just male millennials. In summer 2012, it unveiled its pricier menu Cantina menu, with ingredients meant to increase quality perception and appeal to the health-minded. Mr. Niccol said the menu was scoring well with women and an older demographic. Cantina is about 5% of the chain's sales, which is "meeting our expectations." He said he hopes it will eventually account for 10% of sales, though he did not specify a time frame.
Taco Bell is also testing a "Power Protein" menu in Dayton, Ohio. The menu contains items that have more than 20 grams of protein and fewer than 450 calories. Taco Bell also earlier this year said it was overhauling its menu to reduce sodium and fat to fit stricter dietary guidelines from the U.S. Department of Agriculture.
For budget-conscious consumers -- one of its core groups -- Taco Bell revamped its value menu to include $1 items after prices for some offerings climbed well past a buck. Though the company isn't confirming it yet, it will likely roll out breakfast nationally in 2014, an effort to capitalize on one of the only growth categories -- an estimated $50 billion daypart -- in the restaurant industry in the last decade.
Taco Bell's challenge now is keeping up its momentum and higher consumer ratings. Sales are up so far this year, but lag 2012's growth. In the second quarter U.S. same-store sales were up 3%, still relatively good for an industry that continues to struggle post-recession.
The question may be how much more mileage it can get out of the Doritos tacos. As any marketer knows well, today's hot item can quickly become yesterday's news. "I'm not worried about it, but we've got to be innovative," said Liz Matthews, senior director-food and beverage at Taco Bell, noting that the chain does not have a set number of the co-branded varieties it wants to introduce. But here Taco Bell has plenty of options: Analysts report there are 126 varieties of Doritos around the world.