Doritos tacos are saving Taco Bell
The chain boosted same-store sales by 6% in the first quarter -- a huge turnaround.
The fast-food chain's sales are suddenly very hot, thanks mostly to the new Doritos Locos Tacos it began selling in March. Taco Bell's turnaround was a highlight of parent company Yum Brands' (YUM) earnings report this week.
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The biggest indicator of Taco Bell's new success is that sales at locations open for at least a year rose 6% for the first quarter. That's a huge change -- and a particularly significant one, given that Doritos Locos Tacos were available for less than a month out of the quarter. The company thinks Taco Bell's sales will ratchet even higher in the current quarter -- perhaps seeing growth in the low double digits.
The signature taco has a shell made entirely from Nacho Cheese Doritos. Taco Bell has bigger plans for Doritos tacos, including the addition of a new shell later this year made from Cool Ranch Doritos.
Yum Brands' chief financial officer, Rick Carucci, called the Doritos Locos launch "enormously successful" in a conference call with analysts Thursday, The Associated Press reports.
The Doritos shell was exactly what Yum Brands needed. Although the company does most of its sales overseas, the U.S. is still a crucial market and Taco Bell makes up 60% of its U.S. profit, according to the AP. (Yum also owns Pizza Hut and KFC.)
Taco Bell was hit hard last year by a lawsuit claiming the chain's meat filling didn't have enough real beef. The lawsuit was later dropped, but the damage was done. Sales were in a slump. Doritos Locos Tacos are part of the chain's recovery, along with a new breakfast menu and a line of higher-quality menu items under the "Cantina Bell" brand.
The Taco Bell turnaround was a bright spot for Yum Brands, helping ease the pain as the chain's sales in China slightly missed expectations. Yum has been a favorite way for investors to make a China play, since it has more than 3,800 KFC restaurants and nearly 700 Pizza Huts in the country, Reuters reports. The company saw same-store sales grow by 14% in China in the quarter, a gain from 13% a year earlier but still missing the 14.6% rise expected by analysts. Margins in China fell as wages rose along with the cost for raw materials.
In the U.S., same-store sales grew by 5% -- lifted mostly by Taco Bell. Analysts were expecting only 2.2% growth.
The Doritos Locos launch significantly improved Taco Bell's image, according to a study by YouGov BrandIndex. On the day the Doritos tacos debuted, Taco Bell had a buzz score of only 14 with Mexican restaurant diners. But over the next two months, the chain's score rose to 32 (index scores range from negative 100 to 100).
Taco Bell's score rose among all adults over age 18, according to the study. For all adults, its buzz score went from 9 to 20 within two weeks and settled back to 16 in early April.
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By the way, the best combination of doritos and Taco Bell is to dip the chips in pintos n cheese. They should offer a bag of doritos and the pintos n cheese as a one dollar meal deal. The sales would be tremendous. There you go Yum, now give me a job.
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