Taco Bell’s ‘Lights’ menu seeks fix for setbacks

Taco Bell’s ‘Lights’ menu seeks fix for setbacks – Border Lights, restaurant’s new reduced-fat meals

Richard Martin

IRVINE, Calif. – Still reeling from a nutrition group’s highly publicized attack on Mexican food, Taco Bell Corp. is watching for signs its debut this week of a new lower-fat menu will help reverse the first quarterly downturn in the chain’s same-store sales since its trendsetting “value menu” launch in 1988.

Backed by a $75 million marketing budget, Taco Bell’s systemwide rollout of alternative “Border Lights” items, boasting one-fifth fewer calories and less than half the fat of the chain’s standard fare, earned advance praise from the Center for Science in the Public Interest. CSPI is the Washington-based group whose scathing report last year on fatty Mexican foods depressed sales throughout the restaurant category dominated by the PepsiCo-owned fast feeder, much as CSPI’s recent critiques of Italian and Chinese cooking wounded segments.

Calling the eight-item Border Lights menu a “first” among major chains, CSPI executive director Michael Jacobson said the offerings appear to be “more than a marketing gimmick.” Echoing forecasts by Taco Bell itself, Jacobson predicted that the chain’s menu makeover would set “a new standard for healthier fast food that should have a ripple effect throughout the industry for years to come.”

But skepticism and controversy also greeted 4,800-unit Taco Bell’s dietary foray as Border Lights was unveiled formally just one day after the Irvine-based company laid off 10 percent of its headquarters staff and posted a 2-percent dip in comparable-unit sales for the fourth quarter ended Dec. 31.

Against that backdrop some analysts saw the timing of the low-fat launch as a sign the chain’s 6-year-old “value” campaign had lost steam. Others questioned whether Taco Bell’s 10-cent-per-item surcharge for comparable “light” cuisine items would conflict with the chain’s bargain image, if not its focus on Generation X consumers.

“I don’t think [Border Lights! is out of sync with their audience,” Technomic Inc. president Ron Paul said, referring to an apparently growing health consciousness among college-age consumers. But, “whether [Taco Bell] can get a premium [price] – that raises some concerns in my mind,” Paul added. He said the chain’s Border Lights pricing brings to mind “the old Andy Rooney question, ‘If you leave something out, how come I have to pay more for it?'”

However, analyst Roger Lipton of Ladenburg, Thalmann Inc. in New York said Border Lights “is in tune with the times” and signifies Taco Bell’s proactive “catering to the graying of America.”

Citing the chain’s claim that flavor was not sacrificed in its reduced-fat reformulations, Lipton dismissed comparisons of Border Lights to a lackluster good-for-you launch by McDonald’s several years ago. “The problem with McLean Deluxe was it didn’t taste quite as good as a regular burger,” Lipton said. “People will eat ‘healthy’ if they don’t have to sacrifice taste.”

Paul concurred, saying, “If the taste is as good as [Taco Bell’s regular items], then there’s a market.”

According to John Martin, Taco Bell’s chairman and chief executive, “If this does what our research has told us, it’s transformational.”

He predicted that Taco Bell’s fat-cutting initiative would grow into a $5 billion new market for his chain by the end of the decade and inspire competitors to play catch-up.

But other front-line fast feeders scoffed at the suggestion they would be drawn into diet warfare. “We’ve already been there; welcome to the club,” said Denny Lynch, a Wendy’s International vice president, when told Taco Bell is comparing the 8 grams of fat in its 9-ounce Light Burrito Supreme to the 36 grams in Wendy’s 10-ounce Big Bacon Classic burger.

Burger King spokesman Michael Evans also repudiated the forecasts by CSPI and Taco Bell, despite the chain’s similar comparisons with BK’s 39-grams-of-fat Whopper. Invoking his chain’s 40-year-old “have it your way” slogan, Evans said the fast-food industry already “has responded to the consumer by offering salads” and other lower-fat alternatives.

Del Taco, which ranks a distant second to Taco Bell in the Mexican fast-food category, launched a health-oriented product line in 1990, including whole-wheat tortillas and fish tacos, but it flopped and was discontinued.

But Martin said Taco Bell’s health-food push is markedly different from most competitors’ limited nods to nutrition, such as additions of baked potatoes or salads. “A lot of people have been trying to do things that aren’t core to their menus,” he explained. “But we are replicating our original products.”

He said the Border Lights campaign’s phased rollout of four tacos, three burritos and a taco salad between now and April eventually would lead to “light” counterparts for 75 percent of the chain’s entire menu. “Ten years from now these could be replacements, but right now that wouldn’t be a smart idea,” he remarked.

Martin conceded that the CSPI group’s critical report on Mexican food last summer was responsible for his chain’s recently softening sales, not to mention prolonged volume declines of up to 15 percent throughout the Mexican segment.

But he pointed out that Taco Bell’s net sales nonetheless leaped 17 percent in 1994 as domestic same-store sales rose 2 percent for the year and operating profits jumped 7 percent, to $270.3 million. The chain’s gains, he added, accrued even though Taco Bell last year incurred costs of expanding its conventional and nontraditional “points of access” to nearly 25,000 locations, from 9,000 at the end of 1993.

What’s more, asserted Taco Bell vice president Jonathan Blum, the chain’s $500 million increase in sales last year, to $3.4 billion, made it one of the industry’s two leading market-share gainers and diminished the usual significance of same-store sales slippage in the fourth quarter.

Blum also pointed out that Taco Bell notched a 9-percent gain in profit on a 16-percent jump in sales in the fourth period as the chain prepared to add at least another 15,000 points of product access in 1995, including more supermarkets, schools, sports facilities and airports.

The layoffs of at least 75 corporate staffers were attributed to Taco Bell’s decision to scale back or eliminate unspecified corporate projects that were not focused on “guest-centric’ strategic priorities,” according to company president Kenneth Stevens. He said Taco Bell would not comment further on the matter, leaving unanswered questions about how many of the positions may have been cut because of downsizings in Taco Bell’s troubled Hot ‘n Now drive-thru burger division.

As to charges that Taco Bell’s landmark low-price strategy has lost its edge, Martin conceded that “value alone is no longer a competitive advantage.” But he said the chain’s Border Lights tack could spark a sea change in the nutrition attitudes of consumers and restaurants.

“The consumer response has been fantastic,” Martin said, declining to divulge details of limited test marketing conducted since last fall in Portland, Ore., and individual research-and-development outlets nationwide.

“We won’t make more money off of it,” Martin said, citing the profit-limiting higher costs of lean ground beef, low-fat cheese, light sour cream and new foil packaging. But I think we’ll get a heck of a lot more customers.”

He said the chain has been mindful of conventional foodservice wisdom that any special emphasis on healthful items could imply that other offerings are unhealthful. “That, probably from the outset, has been a concern,” Martin said, referring to the menu development he authorized and personally worked on starting nearly two years ago in response to his own weight gain to 230 pounds.

Martin said he has lost 50 pounds while personally testing and revising the reduced-fat items.

Apprised of Martin’s results, Wendy’s vice president Lynch retorted that Wendy’s founder and senior chairman Dave Thomas “has lost 40 pounds eating our baked potatoes, chili and grilled chicken sandwiches.”

Despite the mix of enthusiasm and skepticism directed at Border Lights, the roll-out focused attention on troubling statistics about eating habits and health. The American Dietetic Association has claimed that if Americans reduced their daily intake of saturated fat by only 8 grams, the health-care system would save up to $17 billion each year and 2.3 million fewer Americans would contract heart disease.

But according to the Institute for Science in Society, Americans now spend virtually the same in restaurants as in grocery stores, and fast-food places where fatty foods still predominate garner almost half of all restaurant revenues.

Taco Bell’s ability to market its “light” cuisine convincingly remains in doubt, largely because health-oriented menu offerings may be less compelling than a nutrition watchdog’s sensational warnings about the purported life-threatening risks of fatty foods.

Unlike the “Nightline” – style coverage and ubiquitous headlines that have surrounded recent CSPI nutrition “exposes,” Taco Bell’s highly orchestrated New York unveiling of Border Lights appeared to generate somewhat fewer notices though it still attracted a great deal of national media attention, including two articles in The Wall Street Journal.

But producers of a CNBC TV business-news show, opting to extend baseball strike coverage and other stories, shortened a Border Lights segment to a brief interview with Martin instead of an earlier planned panel discussion with several commentators. And in Southern California the focus of several news articles and broadcast reports about the Taco Bell launch focused largely on protests by Latino rights groups. They perceived negative connotations in the term “Border Lights” in the aftermath of California’s Proposition 187 illegal-immigration furor and the Justice Department’s recent deployment of floodlights and new fencing along the U.S.-Mexico border.

But reactions to Taco Bell’s new menu from other Southern California-based Mexican food chains were more on point. Lou Franson, marketing director for 200-unit El Pollo Loco, congratulated Taco Bell for its “first step” toward healthful menu alternatives. But Franson claimed his flame-broiled-chicken chain’s scratch cooking and use of never-frozen poultry projects a stronger connotation of “health.”

Ralph Rubio, president of the popular Rubio’s Fish Tacos chain in San Diego, said his 17 quick-serve locations added an eight-item “HealthMex” menu of low-fat dishes 18 months ago that has grown to 20 percent of his sales mix. “Rubio’s was never interested in offering a lone, lean item of questionable taste,” explained Rubio, whose chain won “best fast food” recognition in a San Diego Union-Tribune readers poll two years ago.

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