DoritosThe new iPad wasn't the only big thing to be unveiled last week: Taco Bell had a big launch, too -- a new taco shell that's made with Doritos nacho chips. Taco Bell is hoping consumers will scarf down "Doritos Locos Tacos" and drive a turnaround in its lackluster sales.

The plan isn't as loco as it seems at first blush. After all, it's worked for Reese's Peanut Butter Cups, Jelly Belly's new Snapple line and -- not coincidentally -- Doritos' taco-flavored chips.

Taco Bell is banking on the strength of Frito-Lay's popular Doritos brand and favorable results in preliminary market tests of its Doritos Locos Tacos. According to an Associated Press report, one of every three purchases at field-testing locations in Bakersfield and Fresno, Calif., and Toledo, Ohio, included a Doritos Locos Tacos, which is twice the level of most Taco Bell test products.

"People are excited about this taco shell and I think it'll be a pretty good success for them," Peter Saleh, an analyst with the Telsey Advisory Group, noting that the two companies share a lot of crossover in customers.

Taco Bell's move is reminiscent of a step Frito-Lay took in the 1990s, when both companies were owned by PepsiCo (PEP). Doritos added Taco Bell's Taco Supreme beef flavoring to its taco chips and plastered the Taco Bell logo on the outside of the bags.

Frito-Lay eventually discontinued its Doritos taco-flavored line, but in 2010, it brought them back for a limited time due to consumer demand. It restored the taco-flavored chips to permanent fixture status on store shelves last year, citing consumer response. (Taco Bell is also gearing up to offer a version of Doritos Cool Ranch taco shells this fall, according to the Associated Press report.)

Doritos Taco

Taco Sales Could Use Some Pep

The Yum Brands' (YUM) fast-food Mexican chain could certainly use a little more spice in its sales. Last year, Taco Bell saw its sales growth stall following a false-advertising lawsuit that alleged Taco Bell's seasoned beef didn't contain enough of the animal substance to be labeled "beef."

Ultimately, the lawsuit was withdrawn, but the bad publicity contributed to a 2% decline in same-store sales last year, according to Nation's Restaurant News report.

And making that sales performance even more distasteful was the fact that its rivals like McDonalds, Burger King, Jack-in-Box, and others in the quick-serve market posted strong results last year, Saleh notes.


Flash in the Pan, or Permanent Menu Item?

Although consumers apparently were eager to give the Doritos Locos Tacos a try, the trick for Taco Bell is ensuring they purchase them again and again and again.

Doritos tacos may ultimately play out as a novelty if lovers of Nacho Doritos give it a whirl only to be disappointed that the taste doesn't contain the same big bite of nacho taste as the chips.

But consumers will likely flock to Doritos Locos Tacos initially, helping to drive up Taco Bell's same-store sales in the first quarter. The real test, however, will come later in the year, when potential repeat buyers will have had a chance to weigh in again.

Motley Fool contributor Dawn Kawamoto does not own stock in any of the companies mentioned. She does, however, frequent fast-food restaurants and is waiting for the day when frequent eater miles will be awarded. Motley Fool newsletter services have recommended buying shares of PepsiCo and Yum! Brands, as well as creating a diagonal call position in PepsiCo.



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7 Comments

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Hiroshi Mishima

Maybe I'm just not big on Nacho-Cheese Doritos, but I found the tacos awfully salty (probably VERY high in sodium) which didn't sit well with me at all. I had one and I'm not likely to have another. I think it was last year they had a new kind of promo item, but it didn't stick around which is too bad cause I liked it. Wish I could remember what it was.. Anyways, yeah, I kinda wish they'd just stick to what works. I rarely find unconventional foods like this all that appealing.

I think I'll be sticking to regular tacos, nacho belgrandes, and Mexican pizzas at Taco Bell, thanks.

May 02 2012 at 1:27 AM Report abuse rate up rate down Reply
thuggie taylor

i've had it and think they're awesome... i done ever want a regular taco from taco bell again

March 28 2012 at 2:26 AM Report abuse rate up rate down Reply
shenanigans

So gross.

March 21 2012 at 9:41 AM Report abuse +1 rate up rate down Reply
erikamo

It sounds good, but I think a taco shell made from Fritos would be even better.

March 13 2012 at 3:03 PM Report abuse rate up rate down Reply
Oscar

Taco Bell doesn't do anything in Orange County California because Del Taco offers a much better ttasting taco and burrito and always has the bogo coupons available. If you look at the different amounts of meat on the Taco Bell and Del Taco tacos you can see why Del Taco is doing so well. I don't like to pay an extra 30 cents to have tomatoes on my taco like at Taco Bell.

March 13 2012 at 2:12 PM Report abuse -1 rate up rate down Reply
Oscar

Taco Bell doesn't do anything in Orange County California because Del Taco offers a much better ttasting taco and burrito and always has the bogo coupons available. If you look at the different amounts of meat on the Taco Bell and Del Taco tacos you can see why Del Taco is doing so well. I don't like to pay an extra 30 cents to have tomatoes on my taco like at Taco Bell.

March 13 2012 at 2:12 PM Report abuse rate up rate down Reply
tigerladdy

I tried the new Dorito taco and it was not that bad. The shell brings a nice flavor to the taco. I would buy again and when the cool ranch flavor comes out, I will try that one too. If you are looking for something other then a taco, try the cheesey crunchy chalupa. The soft flatbread and the sauce inside they use is so good. Have a great day everyone !!!!

March 13 2012 at 7:51 AM Report abuse rate up rate down Reply