Taco Bell Hires Foote Cone as Its Ad Agency : Move Puts the Future of Former Firm in Doubt
Taco Bell, unhappy with its “Run for the Border” ad campaign, hired a new ad agency on Tuesday. The move appears to place the future of its outgoing ad firm, the Los Angeles office of Tracy-Locke, in jeopardy.
The Irvine-based Mexican fast-food chain had been quietly looking for a new ad agency for months to handle its $80 million in annual ad spending. Its new agency is the San Francisco office of the ad firm Foote, Cone & Belding, best known for creating the popular “California Dancing Raisins” spots.
Taco Bell’s advertising switch comes just two days after rival Burger King, struggling amid the near-frantic battle for market share in the fast-food industry, fired its New York ad agency. And while Taco Bell is looking for a way to increase its share of the $2.5-billion-per-year Mexican fast-food market, its former Los Angeles ad agency will struggle to stay afloat in the competitive Los Angeles ad market.
“We are totally committed to Los Angeles,” said Phil Slott, chairman and chief executive of the Los Angeles office of Tracy-Locke, which has 100 employees. “We are not leaving town in any way, shape or form.”
Other Agencies Have Left
But unless the agency immediately lands a major new client, that may require the office to face many months of red ink. Advertising executives say it could also require a cash infusion from the Los Angeles office’s Dallas-based headquarters. The Los Angeles office, which opened three years ago exclusively to serve Taco Bell, had relied on Taco Bell for the lion’s share of its total $100 million in annual billings. It has three other clients--regional advertising for Pepsi and Doritos and a small project for Campbell Soup Co.--which account for the remaining 20% of its business.
Slott declined to comment on the agency’s immediate plans or on whether it will have layoffs. But he insisted that the agency’s Los Angeles office would not close. Over the past few years, several large agencies have been forced to leave the Los Angeles market.
Two years ago, the Los Angeles office of William Esty temporarily closed its doors after it lost the Nissan business. And one year ago, the ad agency Scali, McCabe, Sloves walked out of Los Angeles when it was unable to drum up enough new business.
Taco Bell officials declined to be interviewed on Tuesday, but in a prepared statement the company played down the agency switch. “What began as a routine agency review to get a fresh and objective point of view on a specific project,” said Elliot Bloom, senior director of public affairs, “broadened to a full-scale agency review to ensure that Taco Bell has the best possible partner in its ongoing growth and development.”
For Taco Bell, which is owned by giant Pepsico, growth over the past few years has slowed considerably. Sales in 1988 were $1.6 billion, up only slightly from the $1.5 billion in 1987. And Taco Bell’s earnings fell to $66.7 million in 1988, down from $74.1 million in 1987.
One advertising research expert says Taco Bell’s advertising over the past few years has not really caught the public’s fancy. Last year, the “Run For the Border” ad campaign--which features executives racing over to Taco Bell in Indiana Jones-like settings--failed to rank among the top 50 best-remembered advertisements by consumers, said Dave Vadehra, president of New York-based Video Storyboard Tests. “Considering all the money they spent,” said Vadehra, “that’s a poor showing.”
Advertising executives say the pressure for immediate results from fast-food advertising is tremendous. Miles Turpin, chairman and chief executive of the Los Angeles office of Grey Advertising, said he personally liked the “Run For the Border” campaign. But officials at most major fast-food company officials “look at sales results every day,” said Turpin. “You have to wonder if Taco Bell officials were seeing figures that they were uncomfortable with.”
Taco Bell has plenty of company. Virtually every major fast-food company, except McDonald’s, has changed ad agencies over the past few years.
