Taco Bell Is Offering Booze With That Chalupa. Should Other Chains Follow Suit?

A way to compete with fast-casual restaurants

Fast-food giants could consider alcohol to regain market share. Illustration: Dianna McDougall; Sources: Getty Images

In an attention-grabbing move, Taco Bell announced earlier this week that one of the chain's Chicago locations would be serving alcohol.

Yes, some Taco Bell consumers will finally have a cold beer to wash down their chalupas and burritos. But why now? According to analysts, Taco Bell and other fast-food chains may be changing their alcohol policies as a way to catch up to the burgeoning fast-casual market—brands like Chipotle and Shake Shack—some of which already serve alcohol. 

The booze announcement comes on the heels of another big change for Taco Bell: Late last month the brand said it would be removing artificial ingredients from its products. And the Yum Brands-owned chain isn't just adding alcohol to the Taco Bell in Chicago's Wicker Park neighborhood, the interior of that branch will also get a make-over too, with lime-green stools along a bar and an exposed brick wall. 

"Fast- and fine-casual has been a growing niche to reach millennials, so it makes sense for Taco Bell to align with a more urban, trendy feel to attract them," said Mary Beth Keelty, ‎vice president of marketing at PM Digital. "But décor and menu enhancements like alcohol and more natural food choices should only be a piece of the overall plan." 

Jordan Cohen, chief marketing officer of Fluent, agreed Taco Bell is "likely doing this in direct response to the growing popularity of fast-casual chains like Chipotle, which already offers alcoholic beverages." Cohen also said Chipotle has been "taking market share away from the traditional fast-food giants." 

Innovations like Taco Bell's breakfast menu have helped buoy its sales. The chain reported a 9 percent increase in first-quarter sales this year. Chipotle reported 10.4 percent growth for the same period, though that was below analysts' expectations of 11.8 percent. 

Allen Adamson, North American chairman at brand consulting firm Landor Associates, expects other fast-food chains to follow Taco Bell's lead.

"Even though a lot of kids go to fast food restaurants, they are restaurants, and they need to broaden their offerings," said Adamson. "I don't expect to see Jack Daniels right after the Big Mac—how [fast-food brands] promote [alcohol] might be subdued—but offering a full range of beverage choices is a smart move." 

But some analysts think it might be too little too late to regain customers who have left for newer options.

"Our ongoing research shows that when it comes to food and beverage consumption, American consumers of all ages and from all regions of the country are increasingly prioritizing healthy eating," said Cohen. 

Plus, "it will be a challenge for larger companies to break into the liquor business," said Devaraj Southworth, CEO and co-founder of the alcohol-delivery service Thirstie. He pointed out that securing alcohol licenses for locations in different cities across the country could cause headaches for brands and franchise owners.

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