Doritos tacos are saving Taco Bell

The chain boosted same-store sales by 6% in the first quarter -- a huge turnaround.

By Kim Peterson Apr 20, 2012 1:57PM
All Taco Bell needed to get out of its slump was a giant bag of Doritos.

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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13Comments
Apr 20, 2012 4:34PM
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nothing better after a night out..........although Im not really a fan of the Dorito taco.........
Apr 20, 2012 4:51PM
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The doritos taco tastes nothing like doritos. Taco bell charges at least a dollar premium for this dorito shell over it's normal shelled taco. It's a duh situation that Taco bell is making more money because of it. People will pay the premium to try the doritos taco and then decide. Hopefully for Yum's sake, more people decide it is worth the cost. I decided it is not but I will continue to eat other products that Taco Bell offers.
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.
Apr 20, 2012 5:25PM
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I don't consider Tacohell mexican food, Even though my dad likes the place,But then he likes McDonalds too.
Apr 20, 2012 5:13PM
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I don't see this turnaround lasting all that long, especially after they raised the meal deal price by 25% in one whack. 
Say what you want about the food, but a $2.50 lunch in this economy makes it taste just a bit better!
Apr 20, 2012 5:46PM
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I wish Taco Bell would put on WiFi just like McD's has in most of their stores. While I luv the iced tea at McD's, Taco Bell food is far better. The free WiFi draws many into McD's. While Taco Bell has gotten a bit too expensive, McD's is also getting expensive considering a Big Mac alone will set you back a whopping $4.50 or more just for the sandwich, but they have a dollar menu with the big glass of ice tea, salad, and Mcdoubles. If you don't have internet or you are on the road with your laptop, where are you going to stop in at?

Apr 20, 2012 5:18PM
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I have tried one only to never eat there again  they suck bad.
Apr 20, 2012 5:58PM
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The recent menu changes have left me craving my Baja Chicken Chalupas!  Bring them back, PLEASE!  And overall, the prices are going up and serving sizes going down.  They used to have good chicken items,with real chicken, but now its the pressed together crap they scrape up from the slaughterhouse floor!  Not been happy with TB for a while now.
May 6, 2013 1:57PM
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That thing is so nasty. How can it be popular? I'll still with crispy or soft tacos, basic chips and cheese nachos, and the occasional bean and cheese burrito. I'd bet Taco Bell would sell just as much if they stuck with these three simple items. 
Apr 20, 2012 5:49PM
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I don't dislike the food, though this taco could be the exception. I haven't tried it, but I'm not a big Doritos fan, either. What I dislike about Taco Bell is the shrinking portions and escalation of prices.  Nachos Belle Grande used to be a meal. Today it is not much more than an appetizer.
Apr 20, 2012 5:29PM
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They are disgusting. and nothing more than mushy orange slop !   ALL the items look and taste the same...I HATED THEM WAY BACK when they removed the black olives and green onions and tried to say that the olives and onions were" contaminated"  or something,,yeah right, just a way to cheapen  all the items into a bunch of different names for the same mushy crap.Baring teeth
Apr 20, 2012 4:49PM
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Please, just let Taco Bell die peacefully.
Apr 20, 2012 3:26PM
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It's still taco hell anyway you slice it
Apr 20, 2012 3:49PM
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  I absolutely avoid eating in Taco Bell, The local one near my house a few miles away has used syringes lying in the parking lot,the inside is less than clean. Regardless of what they put on their menu I won't be a customer...... 
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