Taco Bell in Japan
(Round Two Japan, will this time be a Fiesta or Siesta?)
By Phillip Smith

As a child, growing up on the West Coast of America, Taco Bell, was as common as McDonalds, with locations in every neighborhood. Its classic chicken quesadilla and bean burrito were staples of my college diet and I could not imagine a fast-food landscape without the spicy taco-sauce. Although, since moving to Japan in 2005, I’ve had to settle for eating Taco Bell only when traveling outside of Japan. That being said, every other major US fast-food chain seems to be serving its notable favorites in the land of the Rising Sun. For example, McDonalds operates over 3,100 units (Inagaki, 2015), Kentucky Fried Chicken has 1165 locations (Yum!’s, 2015) and Starbucks has 1117 (Loxcel, 2015); but where is Taco Bell?

On 21 April, 2015, the multinational fast-food chain answered back with its launch into the Japan market with a new location in Shibuya, Tokyo. This is not Taco Bell’s first launch in Japan. Back in the late 1980’s it opened stores in two markets, Tokyo and Nagoya (Matayoshi, 2015). A few years later in the early 1990s, they closed all the Japan operations, abandoning the country.

Will the second attempt be different? How will marketing play a role in its success? Did they invest in market research to gain insight in the lay of the land? How will its competitive environment contrast its first attempt to penetrate the Japan market? What type of competitive strategies will it use? When setting pricing and menu mix, how will competitive bench marketing and competitor analysis play a role in decision making? These questions and others will be reviewed as we dive into Taco Bell in Japan, Round Two, will this time be a Fiesta or Siesta? TACO BELL HISTORY
Taco Bell was started by a man named Glen Bell, who started his entrepreneur dream with a head-to-head rivalry with the McDonald brothers in California during the 1950s, at the start of the fast-food revolution, with his restaurant named ‘Bell’s Burgers’ (Baldwin, 1999). Seeing the crowed burger market developing quickly, Glen decided it was time for a new revolution, the taco revolution, with first his concept called ‘Taco Tai’ in 1954 and finally the first Taco Bell was launched in 1962. Within five years, Taco Bell was coast-to-coast and today there are over 6,000 locations in 20 countries around the world, serving 36 million customers each week (Yum!’s, 2015).

TACO BELL FAILURE IN JAPAN – ROUND ONE
Taco Bell, along with other well established fast-food brands in America like Wendy’s, White Castle, Carl’s Jr. and Burger King、 saw opportunity in Japan in the late 1980s and 90s so the move was on to follow in the footsteps of McDonalds, which entered Japan in 1971 and had over 600 restaurants by 1988 (Galante, 1988). All of these efforts failed to gain a foothold in Japan and each one withdrew from the country.

It’s possible that these companies, including Taco Bell, failed in Japan because of a lack of market research and, specially, not understanding Japan’s market orientation. Taco Bell’s business model was based on the American market model and even today, twenty years later, 80% of its business is limited to the US. Possibly, for Taco Bell and other foreign brands that entered into Japan without proper market research, it did not fully understand or appreciate the environment or connect with the customer’s desires or expectations.

What was Taco Bell’s target market? Let’s review the general cultural difference between Americans and Asians. In the book, Managing Cultural Difference by Harris and Moran (2011), they identified key cultural differences between Americans and Asians. One important key difference, how Asians/Japanese value saving money more than Americans, is an important value.

This extends to the food culture of Japan in the way families eat-in more than they eat-out which can be identified by the comparison of money spent on dining out versus eating at home. As a percentage, Japan spent less than other developed countries including New Zealand, Hong Kong, Canada, Italy, Australia, England, United States, Austria, Ireland and Spain (Satran, 2013).

Japan’s eating culture is based on simple, yet refined dishes, including seasonal vegetables with rice, are at the heart of Japan’s eating habits (Japanese food culture, n.d.). Comparing to America, where the fast-food revolution originated, based on processed-quick food. Therefore Japanese food culture has for the most part, “resisted the pervasiveness of junk snacks and fast food, and remained largely healthy and vibrant” (Recognizing Japanese food culture, 2011).

Harris also notes that Asians valued (a) protocol, (b) being disciplined and (c) status, over the Americans who cared more for informality and being casual (2011). This can again be seen in Japan’s iconic ‘bento’. Japanese mothers have a sense of moral duty to make incredibly intricate lunch boxes that symbolize the values noted by Harris. Americans, on the other hand, gravitate towards the less formal and no reservation or special dress attire required fast-food culture.

In addition, language made it difficult to gain an identity with the target consumer in Japan. An article in the Los Angeles Times, in July 22, 1988, Taco Bell Hopes Japan Says Si to Mexican Fare (Galante, 1988), noted that when you say ‘taco’ in Japan people assume you are referring to octopus, the meaning in Japanese. At that time, there were no major Mexican-style food chains in Japan so Taco and many other marquee terms, often on the menu like burritos and refried beans, which are associated with Taco Bell, were also unknown to Japanese consumers. Taco Bell in its first attempt to enter Japan only made a few minor modifications, such as less spicy sauce and the addition of a seasoned rice dish but, otherwise, the menu remained the same. The other changes were a price increase and smaller portions compared to the menu in America. At that time, you could purchase a taco for .79 US cents, but in Japan the price would have been US $2.10. To offset the ‘taco’ language issue ‘tacos’ was on the menu, but you would still have been purchasing one taco. Dishes such as Mexican Pizza and Nachos Bell Grade would remained unchanged (Galante, 1988). Unfortunately, Taco Bell’s headquarters in Irvine California, didn’t incorporate local factors, (a) cultural differences, (b) a language barrier or (c) price sensitivity into their strategic planning. It did identify their mission and introduce its signature flavors to the Japanese market. Objectives were set, with their expansion plans already identified before the first location opened. But when it came to assessing the current situation, Taco Bell didn’t realize the gravity of the cultural differences, language barriers, or establishing proper price points setting so when it came to the stage of formulating a strategy for meeting the firm’s objectives, I believe it had a blind spot that made proper implementation of set strategies difficult to successfully complete. Therefore, Taco Bell ultimately wasn’t able to resonate with the consumer, thus it failed to gain brand recognition. As a result, sales declined after the initial media frenzy surrounding the initial openings subsided and the business failed.

JAPANS CURRENT LANDSCAPE
The Japanese food service sector has seen a 15.8% decline in total number of food service outlets since 1991 to 2013 (Otsuka, 2015). Although, recently, over the past few years, the growth in the foodservice market in Japan has outperformed the US, Canada, the UK, France, Germany, Italy, Spain, China and Australia (NPD GroupCREST, 2013). Eiko Takahashi, sales and marketing manager for NPD Japan notes, “The macro economy in Japan has been showing recovery signals since hitting a bottom in the 4th quarter of 2012, and consumer confidence has gradually been turning positive, encouraging more foodservice visits from Japanese consumers”( NPD GroupCREST, 2013). I also contend, with the upcoming 2020 Olympics in Japan, American foodservice brands are growing popularity in Japan.

Other positive indicators that the market is ripening for American eateries include recent Japan government data that shows the consumption of rice in Japan has decreased by 50% while the consumption of meat has grown by 300% (Inagaki, 2015). Foodservice Industry Research Institute reports that ‘convenience cuisine’, dining-out or eating ready-to-cook meals, has continued to increase from 30% in the mid-1970s to around 44% now (Inagaki, 2015).

Combined with shifts in consumer preference, Prime Minister Abe’s economic efforts have weakened the yen (to the dollar) and this has improved conditions for investing in Japan, according to Yuiko Mitani, research analyst at Euromonitor (Inagaki, 2015).

In addition to Taco Bell in 2015, Carl’s Jr will re-open later this year (it also previously failed), followed by the New York burger chain Shake Shack and 800 Degrees Neapolitan Pizzeria in 2016 (Inagaki, 2015).

SECOND TIME AROUND COMPETITION
Ahead of Taco Bell’s return, two other fast-food chains, Burger King and Wendy’s, who failed in their first attempts to enter the Japanese market, are still in operation as of now. Burger King, which had 25 locations before closing them down and leaving the market, returned to Japan in late 2007 (Shimizu, 2007). This time around it appears Burger King has completed a competitor analysis, identified some of the strengths of its competitors and taken a page from McDonalds by adopting the marketing strategy of continuous (LTO) limited-time offers (Matayoshi, 2015). McDonalds has been able to enjoy a sustained advantage, for over forty years, with product differentiation that features new, ever-changing, and innovated product lines (Morell, 2012).

Secondly, Burger King has focused this time around on more low-priced items to fuel sales growth and brand identity. It launched a ‘100-yen’ menu to coincide with McDonald’s 100-yen menu. The CEO of Burger King Japan, Yasuyuki Murao, stated, “To attract repeat customers in Japan, we need to focus not just on our core products but on introducing new reasonable items” (Matayoshi, 2015). As of July 2015, it has 93 restaurants and has plans to continue expanding (Doland, 2015).

Wendy’s, another famous fast-food chain operator from America, is also hoping for a different outcome in its second attempt at penetrating the Japan market. It re-entered the Japanese market in 2011 and announced expansion plans of 100 outlets within five years (Market Watch, 2011). It then took a different marketing approach and as of July 2015, it still only two locations operating.

Wendy’s Japan chief executive Ernest Higa admits that the marketing strategy hasn’t turned out the way he had planned in regard to forecasting demand based on their competitive positioning (Nagata, 2015). Unlike Burger King, Higa took the concept of ‘fast casual’, to try to position the Wendy’s brand to try to create an advantage over McDonalds and the rest of the fast-food market (Nagata, 2015). Referencing trends in the US, Higa saw the market demand for a more upscale dining experience with higher prices over the typical fast-food experience. He modeled the relaunch of Wendy’s Japan based on this strategy with burger items such as, “Lobster Surf n’ turf”, “Foie Gras Rossini Burger” and “Premium Caviar & Lobster Sandwich”. These menu items carry costs of 1280 yen (Some Very Expensive, 2013).

TACO BELL’S MARKETING STRATEGY FOR RELAUNCH
Melissa Lora, president of Taco Bell International, said recently, “The world has changed so much” when interviewed after the April grand opening of the first Taco Bell location, “It’s the perfect timing for us” (Inagaki, 2015). Hisakazu Matsuda, president of Japan Consumer Marketing Research Institute, says failed companies of the 1980’s are leveraging learnt lessons and returning with strong local franchise operators and adapting to tastes (Inagaki, 2015).

The 2015 launch menu is completely different than the US menu, a departure from the first launch in the 1980s. Instead of a largely varied, potentially difficult to read and understand menu with complicated, unfamiliar terms, this menu is streamed-line, with only six set-meal options (Taco bell Japan, n.d.). As a first time visitor, I would feel the menu is easy to navigate. Additionally, 33% of the menu is crafted for the Japanese market with the Shrimp and Avocado Burrito and the Taco Rice Bowl (Taco Bell Launches in Japan, 2015).

Secondly, Taco Bell seems to have a clear direction on its Target Group (TG), which appears to be young adults. This represent the generation of Japanese that have been culturally and culinary exposed to dining-out more than its elders and is open to foreign trends in clothing, technology and other product areas. Evidence of this segmentation can be seen in the brand’s marketing mix and by looking at the 4 P’s: product, price, place and promotion. * Product: Limited menu, with French fries as a side dish. * Price: Set menu items are under 800yen, making them reasonable for a set-meal. * Place: Shibuya. One of the busiest districts in Tokyo, packed with youth fashion and culture. * Promotion: Taco Bell is relying on Social Media as its main method of communication. It actively uses Facebook and have accumulated 8,686 likes (Taco Bell Japan -Facebook, n.d.), 1,862 tweeter (Taco Bell Japan -Tweeter, n.d.) followers with 371 tweets and nearly 1000 Instagram followers (Taco Bell Japan -Instagram, n.d.) since the open, a little over four months ago.

Furthermore, Melissa Lora was quoted in a statement in The Daily Meal (Fantozzi, 2015) as saying, “Shibuya has so much energy, it’s very youthful, and you know our brand is a very youthful Brand. So we thought Shibuya would be the perfect area to introduce ourselves to the Tokyo Market.” The store design is also directed at youth, with distressed brick walls and purple neon lights. Finally, the first 100 people to lineup received a free, fashionable black t-shirt as gift from Taco Bell. In all, it was estimated in the neighborhood of 150 to 300 people were in line for their grand opening at 10am (Sato, 2015).

Taco Bell, has a clear direction with its reopening in 2015. Its marketing and leadership team most likely reviewed the STP, by segmentation of the target consumer group, and positioning its brand as a hip, fun fast-food restaurant. So far it is leaving strong impressions in customer’s minds that are being demonstrated on social media platforms.

CONCLUSION
In summary, does the 2015 Taco Bell have what it takes to be successful? From a Growth-Share Matrix analogy, will Taco Bell be STARS, with high market share and high market growth, or DOGS, with low market share and low market growth?

I feel they have three possible weaknesses that need to be addressed over the next twelve months. First, Taco Bell prices in Japan are still higher than those in America (Taco Bell Opens in Japan, 2015). For young adults, higher prices than other notable fast-food chains in Japan from America might adversely impact repeat visitors. Secondly, its limited menu may put it at a sustainable disadvantage, compared to its competitors which offer more diversity in their menu choices. Finally, I’m concerned that the differentiation focus on young “hip” adults opened the doors with a lot of publicity and energy, but this niche is small and it might become difficult for them to connect with the other consumer market segments that will be needed for them to fuel high market growth.

Therefore, in my opinion, Taco Bell has a much stronger chance at succeeding its second time around for a number of reasons: (a) the maturity of the Japanese market over the past two decades with more acceptance of and a cultural shift to convenience foods, the yen being weaker vis-a-vis the dollar and the collective learning based on the fast-food concepts that failed in the 1980s and 90s. If Taco Bell addresses the higher prices, by becoming more price competitive with McDonalds and Burger King (in its second relaunch), it will gain more market share. If Taco Bell adjusts its marketing towards more diverse consumer segments, it will be able to connect with more consumers and build brand loyalty on a larger scale.

In conclusion, with its continual development of its market and marketing strategies leading up to the 2020 Japan Olympics, Taco Bell has the market capability to be a Fiesta.

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