Dunkin' Donuts new strategy to spice up sales: Fewer donuts
It may be time to make the doughnuts -- just a lot fewer of them.
Dunkin' Donuts is testing out a "less is more" strategy in about 1,000 locations out of its 9,000 U.S. stores. The streamlined stores will sell a minimum of what it calls 18 "core donuts," down from about 30 varieties. Dunkin' Donuts said in a statement that, depending on how customers respond, it may pare down its selection nationwide.
The revamped menu comes as parent company Dunkin' Brands Group (DNKN) tries to take on Starbucks as a contender for consumers' favorite coffee chain, which may explain a smaller emphasis on doughnuts. It's also testing a Pasadena, California-based store bearing the shortened name "Dunkin,'" which omits any mention of doughnuts. The company has said it might roll out the new branding to more stores next year.
Limiting doughnut options "will provide a more consistent experience from store to store, and in some cases will actually increase both the variety and quantity of donuts available to our guests," Dunkin' Donuts said in an emailed statement to CBS MoneyWatch. "We will assess the results of the test before making any determination about a possible national rollout."
A second "Dunkin'"-branded location is set to open in Quincy, Massachusetts in early 2018, according to Nation's Restaurant News. Dunkin' Donuts U.S. and Canada president David Hoffman told the trade publication that cutting the variety of doughnuts would help give the stores the feel of a "boutique shop."
As it shifts toward a smaller doughnut lineup in some stores, Dunkin' Donuts is putting more emphasis on its coffee. The company is trying to win over customers from Starbucks with its own pumpkin-flavored hot and iced coffees and lattes, as well as a maple pecan-flavored coffee and lattes. Perhaps not coincidentally, Starbucks debuted a maple pecan latte this fall.
Yet introducing similar coffee flavors may not close the branding gap between Starbucks (SBUX) and Dunkin' Donuts. Starbucks, for instance, is ranked as the 60th most valuable brand by brand consultancy Interbrand, which named it one of the top-growing brand in its annual study. The strength of its brand, valued at $8.7 billion, allows Starbucks to charge premium prices for its coffee.
Dunkin' Donuts may sell coffee of comparable quality, but its brand is based on convenience and speed, which could hamper its ability to raise prices with its audience. That may explain why it's taking a boutique approach by slimming down its doughnut line and dropping "Donut" from its name, although the changes don't come without risks, since loyal customers may not find the overhaul appealing.