Taco Bell's new $2 Meal

Fast food's value-menu war hits a new low today: the $2 combo meal.
Taco Bell will announce plans to roll out $2 Meal Deals that include a taco or burrito, a medium soft drink and a bag of Doritos. It is the only national chain selling an entree, side dish and drink for $2 — a penny more than an iTunes video download.

"This is certainly thinking outside the bun," says Bob Sandelman, CEO of the restaurant research firm Sandelman & Associates. "I'm sure McDonald's will be watching with interest."


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The restaurant industry has struggled throughout the recession and recovery to respond to consumer demands for cheap eats. Pizza Hut is selling $10 any-size pizzas. T.G.I. Friday's briefly offered $5 sandwiches last year. Denny's recently rolled out $4 all-you-can eat pancakes.

Taco Bell's $2 combo meals lower the bar for McDonald's Dollar Menu, where three items cost $3.

"If we just tossed a pebble into the pond, the ripple wouldn't find its way to shore," explains Greg Creed, president of Taco Bell. "We're throwing a boulder into the pond. This will be a disrupter in the marketplace."

Besides a medium drink and Doritos chips, consumers choose from four items: Chicken Burrito, Double Decker Taco, Gordita Supreme or 5-Layer Burrito.

Taco Bell will begin TV ads on Sunday with Taco Bell workers and customers pondering how the chain can sell three items for $2. The actors make the assumption that one of the items must be "free" — then argue over which item is the freebie.

With unemployment hovering around 10% nationally and the prospect of foreclosures still haunting many folks, "Our customers really need us now," says David Ovens, marketing chief. "They love the fact that we're doing this — even if they can't understand how."

Here's how: The 150 million bags of Doritos it expects to sell this year will come from former parent and current supplier PepsiCo. Beverages typically cost chains pennies on the retail dollar.

Taco Bell will continue to offer its 79-cent, 89-cent and 99-cent value menu, Creed says. "This is a way to reframe another point of value," he says.

It's also a way to boost sales. Taco Bell's same-store sales were down 2% in the first quarter. More serious, sales of its combo meals — which peaked at 31% of all sales in 2008 — are now down to 24% of all sales, Creed says.

McDonald's says it isn't impressed.

"Our research shows that we consistently rank among the best in the industry in consumers' perceptions of value," says spokeswoman Ashlee Yingling.