Taco Bell Drives Growth of Yum! Brands Despite Inflation Challenges

New menu items and promotions at Taco Bell boosted Yum! Brands’ sales in the second quarter, despite inflationary pressures affecting KFC and Pizza Hut.

Taco Bell’s new menu items boost growth for Yum! brands amid inflation, while KFC, Pizza Hut struggle

As inflation continues to pressure consumers, Taco Bell is providing a modest sales boost to Yum! brands, even as KFC and Pizza Hut struggle.

According to Quartz, Yum! Brands reported lower-than-expected second-quarter sales on August 6, partly due to lower U.S. consumer spending and the fallout from the Middle East conflict. Despite this, Yum! Brands shares saw a slight increase on the same day.

“Taco Bell is clearly a standout in the current environment, not only delivering same-store sales growth well above the QSR category, but also delivering near-record restaurant margins,” Yum! Brands CEO David Gibbs told investors on the earnings call.

Gibbs noted that Taco Bell sales have increased “across all income cohorts,” despite higher fast-food prices across the industry as new menu items like Cantina Chicken and the popular August 6 Taco promotion continue to attract consumers.

Taco Bell strengthens loyalty programs and menu to meet challenges in fast-food market

Taco Bell and its parent company have invested in loyalty programs and revamped their menus to attract customers. Taco Bell’s offerings include the $7 Luxe Cravings Box and Baja Blast-flavored ice cream, with a Baja Blast-flavored pie coming later this year. The chain is also exploring AI for its drive-thrus.

However, competition remains fierce. McDonald’s is extending its $5 meal deal and testing a new large burger called the Big Arch. Burger King, Wendy’s, Sonic, Dairy Queen and Arby’s are offering a variety of meal deals, ranging from $1.99 to $9. Wendy’s $3 breakfast deal has become so popular that the chain is investing millions to extend the promotion through 2025.

Shake Shack and Chipotle, on the other hand, are not joining the bundle promotion trend, instead focusing on quality and generous portions, respectively.

Despite the diversity of fast food offerings, KFC and Pizza Hut saw sales decline by 3% in the second quarter. Popular chains such as Domino’s, Starbucks and McDonald’s also faced a drop in demand, particularly from international consumers.

Yum! Brands slightly missed Wall Street’s revenue expectations, posting $1.76 billion in revenue for the second quarter, compared with expectations of $1.8 billion.