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Taco Bell Aims for Multiple Markets With Kids’ Meals, ‘Border Lights’

June 12, 1995

SANTA ANA, Calif. (AP) _ Isaac Ibarra reduces a taco to crumbs and lettuce shreds, inhales nacho chips, gulps a drink and starts on sugary cinnamon twists as he considers what’s best about his Taco Bell kids’ meal.

``It’s the toys,″ he decides, poking at a plastic monkey and elephant that can be dismantled and recombined into a mutant beast.

Cheered on by parent PepsiCo, Irvine, Calif.-based Taco Bell has swallowed 76 percent of the Mexican-style fast food market.

It cut prices and refilled drinks free, creating the now prevalent ``value pricing.″ It had suppliers handle most food preparation, chopping restaurant tasks down to final assembly and customer service. It licensed alternate sites: schools, carts, convenience stores, kiosks.

Now, just as school lets out, it’s making a run at families. A lower-fat Border Lights menu eases guilt for older, health-conscious diners. And Isaac gets his Mutant Jungle Mix-ups, part of a $1.99 combo that includes dessert, unlike McDonald’s $2.49 Chicken McNuggets kids’ package.

The Spiderman with his last Chicken McNuggets Happy Meal at McDonald’s was ``not as good,″ says Isaac, a fast-food aficionado at age 7.

It’s the first time Taco Bell has tried offering kids’ meals packages with toys, like McDonald’s and Burger King.

But why do battle in a market that McDonald’s, with more than three times the national sales, has exploited so adroitly? Start with demographics.

With baby boomers shopping for bifocals, there are fewer core customers: the late-teens and 20-something masses who don’t cook at home, keep the fridge stocked with beer and search their car ashtrays for burrito change.

The trick will be keeping their devotion while wooing new customers, said Blaise Mercadante, the chain’s vice president for strategy.

So, for the first time, Taco Bell is now marketing separately to three clienteles: the cost-conscious core customers, children, and the older Border Lights candidates.

That can mean handing out $10 million worth of free Border Lights items, as happened May 8 when Chairman John Martin decided too few new customers were sampling the healthier menu.

It means spending $10 million to advertise the four new kids’ meal packages, a blitz that began Monday.

It means dropping $35 million on tie-ins to ``Congo,″ a killer gorilla flick that Taco Bell hopes will appeal to core customers. (It opened to about $25 million in ticket sales this past weekend despite mixed reviews).

``They’ve always been a very bold, action-oriented chain, and I say that to their credit,″ says Dennis Lombardi, a consultant with Chicago’s Technomic Inc., a restaurant industry research company. ``Here’s a company that’s not afraid to pick up a stick and take a swing.″

Still, he said, ``it may be a slow build″ to attract new customers.

Not every swing has connected. Hot ’n Now, a drive-through chain Martin hoped would take a $5 billion bite out of the burger business, produced some insights into operating efficiencies but no profits. Taco Bell is converting it into an all-franchise operation.

Chevys sit-down Mexican restaurants, purchased in 1993, hasn’t yet been profitable. That reflects improvement costs, accounting changes and Taco Bell’s push to expand the Northern California-based chain nationally.

During Taco Bell’s latest quarter, profits fell 5 percent, the Chevy’s losses increased and sales at established restaurants fell by 2 percent. Martin attributes the decline to a single-minded focus on starting up the separate Border Lights menu.

While McDonald’s McLean Deluxe accounts for a percentage point or two of total sales, Border Lights tastes good enough to capture 25 percent of Taco Bell sales, the corporate leaders insist.

``That’s why we’re giving these away free, so people will find out,″ Martin said the big handout day.

Company researchers also say they believe kids 4-9 have ``burger burnout″ and are ripe to begin pestering parents for easy-to-hold Taco Roll-ups and colorful plastic mutants.

``What we want is to be able to tell people, `You have a choice here,‴ Mercadante says.

This is hardly the first time Taco Bell has strayed into McDonald’s territory. In about a third of its stores, the chain is test-offering breakfast, a McDonald’s pioneered in 1977.

But Fiesta Breakfast Burritos haven’t yet challenged the pre-eminence of Egg McMuffins.

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