1 November 2019 | US

Premium coffee becomes key US sales driver for Dunkin’ as footfall stands still

Dunkin’ reported total third quarter revenues of $172.7m, generating profits of $132.7m. US like-for-likes grew 1.5%, a slight rise on the on the 1.3% reported for the same period in 2018
 

Dunkin' has focussed on premium coffee beverages, such as nitro cold brew, to capitalise on the growing popularity of specialist coffee and café experiences in the US



Sales growth at the second largest coffee chain in the US is being driven higher priced purchases amid a flattening overall footfall, indicating growing premiumisation across the US coffee shop segment. Dunkin’ has pivoted toward quality over the past year, initiating a major coffee-focussed rebrand, revamping its espresso range and expanding its cold brew offer.

“The quality improvements are driving our results… but we also know that we can do more. We are a beverage-led brand, and espresso is a big part of our future. But we will also fight hard to protect our leadership in drip coffee, both hot and iced,” Dunkin’ CEO, Dave Hoffmann, told reporters.

World Coffee Portal research shows major branded chains are driving growth in the increasingly crowded US coffee shop segment as fierce competition makes the market less hospitable for smaller operators. Market leaders Starbucks and Dunkin’ accounted for 80% of net new store openings during the last 12 months. In the third quarter, Dunkin opened 55 net new locations in the US and 22 across its international markets.

Like other US competitors, such as Starbucks and JAB-owned brands, Panera Bread and Caribou Coffee, Dunkin’ has also invested heavily in digital engagement, such as an app-based loyalty schemes and third-party delivery.

In June 2019 Dunkin’ partnered with digital food delivery platform Grubhub to trial an app-based delivery service in New York, with plans to scale the service across Boston, Chicago and Philadelphia. In the third quarter Dunkin’ reported its DD Perks loyalty app, a service which allows customers to make voice activated purchases via Alexa, had 12 million members.

Like-for-likes across Dunkin’s consolidated international markets grew 7.3%, a 4.3% rise on the same period in 2018. This indicates many of the chain’s overseas operations, such as the Middle East and China, remain key growth markets as its flagship US market become more specialised, crowded and competitive. However, Dunkin’s third quarter international revenues of $6.7m pale in comparison to the $166.4m generated by its US business during the period.
 

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