How Dunkin' Donuts is taking aim at Starbucks
NEW YORK -Dunkin' Donuts (DNKN) is going after Starbucks' (SBUX) coveted customers by more aggressively featuring espresso drinks like lattes and macchiatos.
In a phone interview, Dunkin' CEO Nigel Travis said espresso drinks have traditionally accounted for a "fairly small" mix of the doughnut chain's beverage sales, especially when compared with rival Starbucks. But Travis said Dunkin' has started to change that with the introduction of its macchiato last year.
"We're starting to move the needle," Travis said.
Espresso drinks fetch more money than regular drip coffee and help attract younger customers, who tend to come in groups and get food to go with their drinks, Travis said. Yet he noted that many people don't know that Dunkin' offers lattes.
To better highlight its lineup of drinks, Dunkin' even revamped its menu boards in late February to emphasize options like smoothies, lattes and Coolattas. Previously, the menu board was dominated by combo deals and left little room to feature beverages.
Travis said the response to the menu boards has been "overwhelmingly positive."
Already, Dunkin' gets about 60 percent of its sales from beverages. The chain, based in Canton, Massachusetts, wants to push the figure higher because beverages represent the most profitable category on its menu, followed by sandwiches, and then bakery items like doughnuts.
Still, Dunkin' is up against intense competition from fast-food chains like McDonald's, which introduced an all-day breakfast menu last year, and convenience stores that are pushing more food and drinks.
For the first three months of the year, Dunkin's U.S. sales rose 2 percent at established locations, boosted in part by stronger beverage sales. Last week, Starbucks said its sales rose 7 percent at established U.S. locations. The Seattle-based coffee chain has benefited from its popular mobile app and loyalty program, as well as stronger sales of items like breakfast sandwiches.
Starbucks said food accounted for more than 20 percent of U.S. sales for the first time
In another sign that Dunkin' is going after Starbucks customers, the chain announced Thursday that it will introduce an order-ahead option on its mobile app in the New York metro area. Starbucks already offers a similar option nationally.
Next month, Dunkin' also plans to launch a deal offering a Coolatta drink for $1.99. That will mark Dunkin's first national value deal in years, and comes as competitors push deals to attract customers.
For the period ended March 26, Dunkin' Brands Group Inc.'s profit rose to $37.2 million, or 40 cents per share. Excluding one-time items, it earned 44 cents per share, a penny better than Wall Street expected.
It said Baskin Robbins' sales in the U.S. rose 5 percent at established locations.
Total revenue was $189.8 million. That topped $188.7 million analysts expected, according to Zacks Investment Research.