There isn’t much stopping Taco Bell right now and certainly not a pressured macroeconomic environment that has impacted sales and traffic at most of its quick-service peers. The chain’s third quarter results indicated as much with 4% same-store sales growth.
Compare that to sister chain KFC, which experienced a 5% same-store sales decline, while McDonald’s (0.3%), Wendy’s (0.2%), Burger King (down 0.4%), and Popeyes (down 3.8%) also turned in subpar results.
That said, we may only be at the beginning of the runway for this brand given its nominal international presence of over 1,100 units versus, for instance, KFC’s 30,000-ish locations outside of the U.S., and McDonald’s about 28,000. During parent company Yum Brands’ earnings call on Tuesday, chief executive officer David Gibbs noted an accelerated investment in Taco Bell’s international ambitions, especially given “encouraging consumer response” in markets like the United Kingdom.
“Clearly, Taco Bell International has the potential to be a third growth engine for Yum for many years to come,” Gibbs said. (Taco Bell U.S. and KFC International are the company’s current growth engines).
The company is certainly laying the foundation for such potential. Taco Bell’s quest to grow its international presence is evident in its incubator program’s expansion to include employees from international markets to provide input on how to have a more global mindset. It is also translating what Gibbs calls its “magic formula” overseas – brand buzz, value, category entry points, and digital engagement. An example of this is in the U.K., where the brand recently introduced a burrito platform at a value price promoted by High Vis, the market’s first Feed the Beat artist. Taco Bell’s Feed the Beat program has been around since 2006, identifying and supporting fledgling musical artists.
“We’re taking the playbook and moving it to other markets. In the U.S., this isn’t just a functional brand. We believe it’s more aspirational. It has an edge to it. How do we translate that coolness factor outside the U.S. Here’s a great product, but this is Taco Bell,” Taco Bell president of North America and international Scott Mezvinsky said during an interview at Taco Bell’s Irvine, Calif., headquarters in July.
Mezvinsky pointed to three pillars of culture – music, sports, and fashion – that the chain is able to replicate beyond its home market. Taco Bell is also “connecting more with local cultures,” he said, including a recent launch of “encore hours” in the U.K., which allows stores to stay open later near music venues to serve fans after shows. Despite localization, Mezvinsky said consumers are “generally similar” across the world, which gives him even more optimism about the brand’s international prospects.
“There are a lot of similarities across markets in the fact that everybody eats. No matter what the macro head or tailwinds are, this category is resilient. We can benefit from the same thing that most brands outside the U.S. are benefiting from – a generational shift with more people consuming at a higher pace,” he said. “I feel good about international because there will be more growth in the consumer sector outside of the U.S. Just like the U.S., if you’re providing good value and innovation, people are going to get excited and consume your product.”
And as it does in the U.S., Taco Bell will especially lean on that innovation piece, and it will do so through its signature attributes – saucy, cheesy, spicy, and crunchy in familiar forms delivered in a locally relevant way.
“If you don’t get those tenets right, it’s not Taco Bell,” Mezvinsky said, pointing to Taco Bell India’s Crunchwrap stuffed with a spicy paneer filling as an example. “If it was just paneer with naan bread, it wouldn’t be Taco Bell. It sounds basic, but it doesn’t always happen.”
Mezvinsky’s role was expanded earlier this year to include the international business. The brand has been trying to deepen its overseas presence for several years now; in late 2021, Spain became its first international market to surpass 100 units and in 2022, the chain’s international development outpaced U.S. development for the first time. Now, Taco Bell is focused on scaling in international markets with the right franchise partners.
“You can’t just plant flags. The more markets we enter successfully, the more scale will also have an exponential effect – an impact on brand awareness,” Mezvinsky said, adding that the company is “overinvesting” in marketing to create more such awareness. “The longer it takes to get brand awareness, the harder it is to make money. It’s not easy to take a brand that’s low on brand awareness – where tacos and burritos are generally not a common form. They weren’t 62 years ago either when Glen Bell brought Taco Bell to the U.S. How do we replicate what happened then in the U.S. outside of the U.S. in each and every market? That’s where I get excited.
“There is no reason Taco Bell can’t be as big as McDonald’s or KFC outside of the U.S. because we know and have proven our brand works. That’s the vision.”
Contact Alicia Kelso at [email protected]
