Market Overview

Taco Bell's Dollar Cravings Menu Fuels Fast-Food Pricing War

At a time when higher costs are denting the profitability of most fast food chains, Taco Bell — the Mexican food chain of Yum! Brands, Inc. (NYSE: YUM) — launched its Dollar Menu, according to media reports. The Dollar Cravings menu includes 11 items like mini chicken, beef quesadillas, cinnamon twists and spicy potato soft taco with a price tag of $1.

In fact, the Dollar Menu includes many items from Taco Bell's low-cost Why Pay More! line-up, including cinnamon twists and cheese roll-ups. Taco Bell believes that the Dollar Cravings menu will help diners customize their food.

Taco Bell has been focusing on menu innovation to attract new customers. The fast-food chain started a breakfast menu in March and launched a protein-heavy menu last month to cater to health-conscious customers. Last week, the company opened its first fast-casual restaurant taco concept — U.S. Taco Co. — in Huntington Beach to expand beyond the quick-service sector.

The new menu might also be a strategy to attract the youth, who had cut down quick-service restaurant visits in the past few years due to low-disposable income amid the sluggishly recovering economy. In fact, Taco Bell promoted its dollar menu, last week, on Snapchat, a popular photo messaging smartphone app.

Fast-Food War?

The U.S. fast-food sector is an immensely competitive industry, with major players offering attractive pricing points to bring in more traffic.

The menu comes when higher commodity costs are prompting other chains like McDonald's Corp. (NYSE: MCD) and The Wendy's Company (NASDAQ: WEN) to drop dollar menus and move toward more value-oriented pricing.

In fact, last year, McDonald's modified its Dollar Menu — introduced in 2002 — to the Dollar Menu & More, which includes items for $1, $2 and $5. Among others, Burger King Worldwide Inc. (NYSE: BKW) has also aggressively promoted its two-sandwiches-for-$5 deal.

Will Taco Bell' Dollar Menu make Yum! Brands, with a Zacks Rank #3 (Hold), stronger? We would like to wait and see.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
YUM! BRANDS INC (NYSE: YUM): Free Stock Analysis Report
 
MCDONALDS CORP (NYSE: MCD): Free Stock Analysis Report
 
WENDYS CO/THE (NASDAQ: WEN): Free Stock Analysis Report
 
BURGER KING WWD (NYSE: BKW): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Trading Ideas

 

Related Articles (MCD + BKW)

Around the Web, We're Loving...

Get Benzinga's Newsletters