Cantina Bell takes on Chipotle
Chase is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Us 20-something males are getting screwed again. First Burger King realized we are broke, living with our parents, and can't possibly save up enough to buy a Whopper, and now Yum's (NYSE: YUM) Taco Bell is getting in on the bashing. With the debut of their Cantina Bell menu, the Bell is straying away from their late-night-drunk-food mantra. Perhaps to do some clean-up from the recent "it's not beef!" lawsuit; or maybe seeing that Chipotle (NYSE: CMG) is cleaning up with their commitment to quality, natural, free-range and organic whenever possible (whatever that means), Taco Bell is trying a different tack. Though they are not claiming free-range and organic, Taco Bell is using the name and talents of chef Lorena Garcia to create Cantina Bell, Taco Bell's more natural cousin. The new menu items (you can find out what these are by perusing the menu at Chipotle, e.g., cilantro rice, black beans, guacamole, pico de gallo, fire roasted salsa, citrus marinated chicken) will be offered within existing Taco Bell locations and will be priced at less than $5, as compared with the mid-$6 you can expect at Chipotle.
So, to combat slumping sales and poor PR Taco Bell will be offering a low(er) cost, lower quality item in a market that doesn't seem to truly need it at the moment? Chipotle has grown revenues by more than 20% in the past two years and the stock is up 529% since the start of the Recession (signified in this case by the collapse of Lehman). Darden Restaurants (operator of places like Red Lobster, Olive Garden, and the Capital Grille) by comparison, is up 58%. In other words, Chipotle hasn't been hurt by the recession. Though traditional restaurants have fared better than the market (using S&P500), they have struggled compared to fast casual. Customers are willing to pay a little extra for something better in a fast casual setting, but are not yet willing to go full-spend mode at a restaurant.
The one thing Taco Bell has on Chipotle, and I stress just the one, is convenience. A Chipotle during lunchtime is a mad house. Taco Bell has got the quick-service thing locked down, and time-constrained customers just might be willing to sacrifice some quality so they can have a somewhat healthy lunch for which they don't have to wait 20 minutes in line. At any rate, an image makeover that appeals less to us bum 20-something dudes, and more to those job-having types, should give Taco Bell the ability to compete with the new images of the other mainstream fast food restaurants.
TheLaowai has no positions in the stocks mentioned above. The Motley Fool owns shares of Chipotle Mexican Grill. Motley Fool newsletter services recommend Chipotle Mexican Grill and Yum! Brands. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.