' Mexican food chain takes any more pages from
playbook, maybe we should just start calling it McTaco Bell.
Should we paint those cantina arches a nice golden color?
Signaling it's serious about the incursions it's making on the
burger joint's territory, Taco Bell has quietly unveiled yet
another strategy its rival popularized: the dollar menu. Taco
Bell this month began offering 11 different food items for
exactly $1.00, which, for some of the items appearing there,
actually represents a penny price increase. Items on the Dollar
Cravings menu include spicy potato soft taco, triple layer
nachos, shredded chicken mini quesadilla, and caramel apple
The dollar menu move follows Taco Bell's recent decision to
start offering breakfast items, entering the daypart McDonald's
has long dominated. The industry researchers at Technomic
estimate the burger bastion has a 31% market share of the
breakfast market, which generates 20% of its $28.1 billion annual
worldwide revenue. With White Castle selling sliders for
starting to sell burgers, McDonald's is feeling competitive
pressures from all sides.
Yet even though the burger joint continues to see sales slip,
and the deep freeze it has fallen into has
failed to thaw
, I'm not sure Taco Bell's new Dollar Cravings menu is as much of
a threat to McDonald's business as some seem to make it out to
be. After all, Taco Bell
the breakfast battle.
McDonald's continues to serve up a winning combo at
This also isn't Taco Bell's first run at the low-price menu.
It previously ran a similar campaign with its "Why Pay More?"
menu, which saw items priced at $0.79, $0.89, and $0.99. But
over time, customers watched those prices creep well beyond the
dollar threshold, so the twist this time seems to be that it's
pricing the food items at a flat buck. That looks like little
more than a rebranding effort of its menu.
Moreover, McDonald's faces a broad range of low-cost meals
from the likes of
Burger King Worldwide
, which last year unveiled its "Right Price, Right Size" menu
that sells items between $0.99 and $1.99. Another competitor
entering the market touting $1-per-item food isn't going to mean
very much, at least not to McDonald's.
But Yum! Brands might feel the pinch. It's suddenly reeling
yet another scandal
broke out in China, its largest market for both sales and
profits. Although Taco Bell is one of its smallest contributors
to Yum's revenues and operating earnings,, and despite the chain
enjoying rising system sales and comps last quarter, the Bell's
restaurant margins still slumped 2.7 percentage points.
Operating profits also decreased 2%.
Those few items on its dollar menu getting a penny-per-item
boost aren't likely going to reverse that course, but if it
proves popular, it could pinch profits further.
Data: Yum! Brands SEC filings.
McDonald's has enjoyed no benefit from including
among those that still cost a buck. The Dollar Menu & More
has failed to increase sales, as have
, like its Mighty Wings and BlitzBox. Although the burger
shop is experiencing a tough environment, both from more
competitors and from consumers eschewing fast food in favor of
more healthful fast-casual restaurant offerings, don't think that
just because Taco Bell is selling burritos for a dollar, burger
sales at McDonald's will plunge more.
I'm expecting more blowback on Yum! Brands for the move rather
than thinking McDonald's is going to end up in the frying oil
because of it.
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Is McDonald's In Trouble Because of Taco Bell's
New Dollar Menu?
originally appeared on Fool.com.
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