Dunkin' Takes On Starbucks -- WSJ
October 24 2018 - 3:02AM
Dow Jones News
By Julie Jargon
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 24, 2018).
Dunkin' Brands Group Inc. is trying to undercut what rival
Starbucks Corp. charges for a signature product: quality
espresso.
The Canton, Mass.-based chain on Wednesday said that revamped
lattes, cappuccinos and Americanos are the biggest change to
Dunkin's drinks menu since it started serving espresso 15 years ago
from simpler machines.
Dunkin' wants customers to see it as cheaper than Starbucks and
just as good. The company dropped the "Donuts" from its name last
month and is also encroaching on Starbucks's turf by selling
cold-brew coffee in its shops and bottled iced coffee in grocery
stores.
Starbucks has generated lackluster sales growth in recent
quarters in the U.S., its largest market, and competition to sell
high-quality coffee is intensifying. The price of a 16-ounce hot
latte at a Dunkin' in Baltimore, where the chain has been testing
the new drinks, is $3.59, with tax, compared with $4.19 for the
same-sized drink at a nearby Starbucks.
"There's no reason to go to Starbucks anymore," said Tony
Weisman, Dunkin's marketing chief.
Going up against Starbucks, whose business was modeled after the
espresso shops of Italy, could be a big challenge for Dunkin',
which always has been known more for its smooth coffees than a bold
drink like espresso.
Dunkin' has been remodeling its stores with cold-brew taps and
drive-through lanes for mobile orders. Like Starbucks, the chain
has struggled to attract new customers. Dunkin's U.S. same-store
sales grew 1.4% in the second quarter, as an increase in average
check offset a decrease in traffic. The company is scheduled to
report third-quarter results on Thursday.
Dunkin' has lagged behind in espresso sales as the category
became the fastest-growing kind of coffee in cafes in recent years.
McDonald's Corp. has a line of low-price espresso drinks, too.
The new espresso beverages will be served at Dunkin's more than
9,200 U.S. stores in bright orange cups to distinguish them from
other Dunkin' drinks in white or clear cups.
The company hopes the drinks will help it boost business in the
afternoon, which has proved challenging for both Dunkin' and
Starbucks.
The company is investing $100 million in the U.S. in the next
year, more than half of it in restaurant technology, including the
espresso machines. Franchisees have committed even more money to
the upgrades. Dunkin' wouldn't say how much franchisees are
contributing or how much the new machines cost. Company executives
chose the Swiss-made machine that will be the new standard,
following trips to Europe and repeated tests to get the extraction
from its coffee beans just right.
"The new equipment in some ways is faster than the old
equipment," said Scott Murphy, chief operating officer of Dunkin'
U.S.
Parag Patel, a franchisee who owns 25 Dunkin' shops in Baltimore
and five in California, spent months teaching his employees how to
hand-pull espresso shots, steam milk and blend the various drinks
with different flavors. He said they are already drawing in new
customers in Baltimore.
"The crew members feel like true baristas back there," Mr. Patel
said.
Write to Julie Jargon at julie.jargon@wsj.com
(END) Dow Jones Newswires
October 24, 2018 02:47 ET (06:47 GMT)
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