| US

Dunkin’ doubles down on coffee amid positive third quarter sales

Dunkin’ delivers 6% US revenue growth to $350m during the third-quarter as it prepares to introduce new espresso range – but coffee chain is latest US giant to endure stagnant like-for-like sales amid challenging market conditions for larger operators

Investment in a rebrand, improved coffee products and digital ordering apps appear to be paying off for Dunkin’ as it vies for market share against main US rival, Starbucks. The second biggest coffee shop chain in the US reported profits of $66m in the third quarter, up from $41m compared to the same period in 2017.

Like-for-like sales, however, appeared flat, with Dunkin’ achieving 1.3% growth and missing a 1.5% target, according to a Reuters report. Dunkin’ is not the only US coffee chain to endure a slump in customer footfall. US market leader, Starbucks, has struggled with stagnant US sales in 2018, resulting in 150 store closures planned for 2019, while the third-biggest coffee chain in the US, Tim Hortons, posted just 0.3 like-for-like sales growth earlier in October.

“Dunkin' US comparable store sales growth was led by strong beverage sales, coupled with new product innovation,” said David Hoffmann, Dunkin' Brands Chief Executive Officer and President Dunkin' US.

Dunkin’s new espresso range responds to growing premiumisation in the US coffee shop market, where consumers are turning away from traditional filter coffee in favour of espresso-based beverages. Growth in specialty coffee is the most important US coffee industry trend in 2018 according to coffee industry leaders surveyed by Allegra’s upcoming Project Café USA report. Dunkin’s coffee-focused rebrand, in which the word ‘Donuts’ was removed from the chain’s branding, has been supplemented by a $100m investment to accelerate beverage marketing and improve equipment.

“Espresso is one of the fastest growing coffee categories, particularly among younger consumers, and with our coffee credentials we believe we have a tremendous opportunity to improve our awareness and credibility among espresso drinkers,” said Tony Weisman, Chief Marketing Officer, Dunkin’ U.S.

The third quarter results also revealed Dunkin' Brands franchisees and licensees opened 77 net new restaurants globally. This included 52 net new Dunkin' U.S. locations.

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