Case Study Presentation: Taco Bell

Assume the role of Taco Bell President Greg Creed and consider the appropriate response to the 2011 “Where’s the beef?” lawsuit.Prepare
a PowerPoint® presentation (in the role of Creed) that you will give to
your communication team at Taco Bell to outline your vision for the
company’s response to the lawsuit. Assume that the “Thank you for suing
us” ad has not yet been released, but that it has been recommended by
one of your trusted advisors.Address the following in your presentation:Should the ad run? If so (or if not), how does that fit into your broader strategic goals for the response?Create alternative responses, weighing the pros and cons of various strategies. Consider the following:
The purpose of the company responseThe intended audienceThe context and channel The broader goals of how Taco Bell should shape its public image and improve its trust with consumers
Prepare at
least 8 slides (excluding the title and references slides) with
detailed speaker notes of approximately 75 words per slide. Your speaker
notes should reveal the reasoning behind your proposed strategy.
tacobell.doc

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Case Study: Taco Bell Corporation: Where’s the Beef?
“We are asking that they stop saying that they are selling beef.” 48
“Thank you for suing us.” On January 28, 2011, Taco Bell placed full-page advertisements with this
phrase in big bold letters in local and national newspapers, including the New York Times, USA Today,
and Wall Street Journal. Taco Bell was striking back against a lawsuit that challenged the beef content in
the chain’s beef tacos.
Days earlier, on January 19, Taco Bell was served with a lawsuit, filed by a disgruntled customer, alleging
that the chain’s taco mixture consists of more filler than meat.49 News of this claim became widespread
on the Internet. Soon after the lawsuit, the situation was parodied by Stephen Colbert on his Comedy
Central show, The Colbert Report. Taco Bell’s reputation was being threatened and the company would
be forced to react swiftly and decisively.
The Lawsuit
Amanda Obney, a resident of California, alleged that Taco Bell’s advertising and labeling led her to
believe that the taco meat filling was seasoned beef. Based on this assumption, she purchased food
items labeled as “beef,” and in doing so suffered injury and lost money as a result of the alleged
misrepresentations.50
The consumer rights class-action suit filed by Alabama law firm Beasley Allen challenges Taco Bell’s
practice of representing to consumers that the filling in many of its “beef” food products is “seasoned
ground beef” or “seasoned beef,” claiming that a substantial amount of the filling contains substances
other than beef. The lawsuit states that the “seasoned beef” does not meet the minimum standards set
by the United States Department of Agriculture (USDA) and should be labeled as “taco meat filling.” This
action seeks to require Taco Bell to properly advertise and label these food items and to engage in a
corrective advertising campaign to educate the public about the true content of its food items. The
lawsuit values the damages as exceeding $5,000,000.
The lawsuit pertains only to those items referred to as “seasoned beef” and not to Taco Bell’s items
containing chicken or carne asada (roasted beef) steak. Those items are acknowledged as actually being
chicken or carne asada steak.
Specifically, the lawsuit alleges that Taco Bell misrepresents certain ingredients as “seasonings” when, in
fact, they are not added for flavor, but rather to increase the volume of the product. The lawsuit refers
to these ingredients as “binders” and “extenders” (e.g., “isolated oat product”). Given the belief of the
plaintiff that there are binders and extenders, the labeling of the products should be “taco meat filling.”
To further support this change in labeling, the lawsuit notes that internally, Taco Bell refers to its
“seasoned ground beef” and “seasoned beef” as “taco meat filling,” as evidenced by the labels on the
containers shipped to its restaurants.
Beef Defined
Merriam-Webster defines “beef” as “the flesh of an adult domestic bovine (a steer or cow) used as
food.”51 The USDA defines “beef” as “flesh of cattle,”52 and states that “ground beef” “shall consist of
chopped flesh and/or frozen beef with or without seasoning and without the addition of beef fat as
such, shall not contain more than 30 percent fat, and shall not contain added water, phosphates,
binders, or extenders.”53
The USDA developed the Food Standards and Labeling Policy Book (the “Policy Book”). The Policy Book
provides guidance to help manufacturers prepare product labels that are truthful and not misleading. In
regard to food labeled as “taco filling,” such food items must contain at least 40 percent fresh meat and
the label must show the true product name, such as “Taco Filling with Meat,” “Beef Taco Filling,” or
“Taco Meat Filling.”54
Taco Bell Corporation
Taco Bell Corporation, which is based in Irvine, California, is the nation’s leading Mexican-style quickservice restaurant (QSR) chain serving tacos, burritos, signature quesadillas, Border Bowls, nachos, and
other specialty items. As of 2011, Taco Bell serves more than 35 million consumers each week in
approximately 5,600 restaurants in the United States. The company is credited with reforming the
nature of the QSR industry, including revolutionizing new kitchen preparation systems and supply chain
management processes.55
Taco Bell was founded in 1962 by Glen Bell, a former U.S. Marine, in Downey, California, serving what
his customers called “Tay-Kohs.”56 Before Glen Bell created Taco Bell, he started Bell’s Drive-In and
Taco Tia in the San Bernadino area in 1954. Taco Bell’s growth continued and in 1964 retired L.A.
policeman, Kermit Becky, became Taco Bell’s first franchisee, opening a restaurant in Torrance,
California. In 1967, Taco Bell’s hundredth restaurant opened in Anaheim, California. In 1970 Taco Bell
went public with a total of 325 restaurants. Glen Bell sold 868 Taco Bell restaurants to PepsiCo Inc. in
1978 and became a PepsiCo shareholder.
Of Taco Bell’s operating units, approximately 75 percent are franchised. The top three states with the
largest number of operating units are California, Florida, and Ohio. Franchisee requirements are
stringent, with a minimum net worth requirement of $1 million, and an average total investment of
$1.45 million.57
Taco Bell is well known for its innovative advertising and marketing strategies. In 1989, Taco Bell
pioneered the concept of linking fast-food marketing promotions with major movie blockbusters. Its
“Batman” promotion placed Taco Bell in the spotlight and was a huge success.
In 1991, Taco Bell opened the first Taco Bell Express in San Francisco. This restaurant concept
incorporates a reduced-size restaurant with a limited menu, meant to emphasize volume.58 Typically,
the menu consists of items priced under $1. Locations where Taco Bell Express stores operate include
shopping malls, airports, rest stops, and inside convenience stores.
PepsiCo, seeking to boost its stock value by narrowing its business focus to soft drinks and packaged
snacks, divested their ownership of Taco Bell in 1997.59 A new company, called Tricon Global
Restaurants Inc., was formed.60 Under this structure, Taco Bell’s president reported directly to the
president and CEO of Tricon.
Tricon announced in 2002 that it received shareholders’ approval to change its corporate name to Yum!
Brands, Inc. (NYSE: YUM). According to David Novak, Yum! Brands chairman and chief executive officer,
this name change, “better reflects the company’s expanding portfolio of brands and the unique fun and
recognition culture” that is driven across the global company.61 Yum! Brands is headquartered in
Louisville, Kentucky. The company’s brands include A&W Restaurants, KFC, Long John Silver’s, Pizza Hut,
and Wing Street. KFC, Pizza Hut, and Taco Bell are the global leaders of the chicken, pizza, and Mexicanstyle food categories.
Beasley Allen Law Firm
Founded in 1979, Beasley, Allen, Crow, Methvin, Portis & Miles, P.C., represents plaintiffs and claimants
in civil litigation (“Beasley Allen”). The firm is a leader in civil litigation on behalf of claimants and holds
state and national records for the largest jury verdicts in various categories:
Largest verdict against an oil company: $11.9 billion – ExxonMobil Corp.
Largest pharmaceutical drug settlement: $4.85 billion – Merck & Co.; Vioxx-related claims
Largest private environmental settlement: $700 million – PCB damage claims; 20,000 current and
former residents of Calhoun County, Alabama (toxic tort damages)
Largest predatory lending verdict – $581 million: family in Hale County, Alabama
Lawyers within the firm have been profiled in national publications such as Forbes, Businessweek, the
Wall Street Journal, and the New York Times as well as on television shows such as 60 Minutes and Good
Morning America. The firm has a national reputation for being at the forefront of consumer litigation
and publishes a monthly consumer news report, The Jere Beasley Report.
The firm’s areas of expertise include personal injury, products liability, consumer fraud, business
litigation, environmental litigation, and pharmaceutical litigation.62
Negative Publicity
Taco Bell has experienced negative publicity in the past and has demonstrated the ability to overcome
negative headlines and attacks on their brand. Particularly, Taco Bell has dealt with a StarLink corn issue
(i.e., genetically modified food), an E. coli contamination, rat infestation, and Salmonella poisoning.
StarLink Corn
In 1996, Taco Bell entered into a licensing agreement with Kraft Foods to distribute Taco Bell-branded
taco shells in grocery stores. An NGO (nongovernmental organization) known as “Friends of the Earth”
identified the fact that these taco shells contained a genetically modified corn ingredient unapproved
for human consumption.63 Although a Kraft supplier was ultimately responsible for the product, Taco
Bell took the brunt of the criticism as the packages were branded primarily with Taco Bell’s logo. Kraft
initiated a recall of the corn shells, and Taco Bell subsequently filed a class-action lawsuit against those
producers of corn flour and tortillas containing StarLink corn.64
E. Coli Outbreak
Several years later, in December 2006, Taco Bell voluntarily closed stores in three states after lettuce,
consumed in certain Taco Bell restaurants and contaminated with E. coli, sent several dozen people to
the hospital. Preliminary testing by an independent lab found that green onions may have been the
cause of contamination, and Taco Bell subsequently removed green onions from every store in the
country. Taco Bell usually purchases onions from California, but in winter months the onions are often
imported from Mexico, which was considered to be the root of the problem.65 However, health officials
later identified lettuce as the health concern, and Taco Bell responded by replacing one of its lettuce
suppliers.66
Rat Infestation
In February 2007, a joint KFC/Taco Bell restaurant in New York City closed after rats were discovered
inside the building. Taco Bell said they would work with the local franchisee to correct the problem.67
Salmonella Outbreak
Most recently, in August 2010, a multistate Salmonella class-action lawsuit was filed against Taco Bell.
Approximately 155 people across twenty-one states were confirmed with salmonellosis.68 Taco Bell’s
only comment stated how seriously they take food safety, and that their food is perfectly safe to eat.69
Unique Approaches to Marketing
The company has a reputation of going to extreme measures to portray themselves as a clever,
lighthearted organization intent on providing value to their consumers.
Taco Liberty Bell
One of the publicity efforts that made national headlines took place on April Fools’ Day in 1996, when
Taco Bell placed an advertisement in seven leading newspapers announcing that they had purchased the
Liberty Bell and renamed it the Taco Liberty Bell. Taco Bell also urged other companies to do their part
to help reduce the national debt.70
Mir Space Station
In March 2001 during the reentry of the Mir space station, Taco Bell announced they had placed a large
target in the middle of the Pacific Ocean. If a piece of debris struck the target, they stated that all
Americans would be rewarded with a free taco courtesy of Taco Bell. As is customary with these types of
promotions, Taco Bell purchased an insurance policy in the rare instance that the target was hit by a
piece of the space station.71
World Series
The 2002 World Series provided a similar opportunity. A batter simply had to hit a target placed in San
Francisco Bay in order to win tacos for the entire country.72 When no batters accomplished this feat,
Taco Bell put a target in the home run area left of center field at Busch Stadium in St. Louis, in game
three of the 2004 World Series with the same promise of free tacos.73 Failure to hit this target
prompted Taco Bell to make it even easier for the batters in the 2006 World Series by just requiring a
home run in the entire area left of center field.74 Again, this failed to occur. As such, in 2007, Taco Bell
lowered the bar with its “Steal a base, steal a taco” campaign, in which a base runner simply had to steal
a base in order to win a taco. Taco lovers across the country were not disappointed, and Taco Bell
subsequently made a $20,000 donation to the Boys & Girls Clubs of America.75
Next Steps
Taco Bell President Greg Creed understands the urgency of the situation and the fragile ground his
company stands on when it comes to food quality. Is this an issue that Taco Bell should quietly address
to avoid any future negative publicity? Or, should Taco Bell respond to the lawsuit head-on in an
attempt to improve Taco Bell’s damaged reputation? These questions and more will weigh on his mind
as he and his team work to compile a response to help their brand weather the oncoming storm.

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