Dunkin’s DNA is built around speed and convenience as a beverage led to-go brand with a mid-level positioning above c-store and QSR but below Starbucks. The chain’s famous coffee, donuts & munchkins are legendary in core Northeast markets and its coffee authority is supported by an expansion into espresso, cold brew & frozen coffee. The associated lift of Dunkin’s caffeinated drinks generates strong emotional connections with its guests and results in a loyal, ritualistic customer base, particularly during the morning daypart. The brand seeks to remove 2 of the key pain points found at a typical coffee shop (high prices & slow service speed) and, to this end, the ongoing brand repositioning (early innings of a 3 year plan) includes: national value; a focus on speed & convenience (speed of Dunkin’) driven by restaurant simplification and equipment innovation designed to improve productivity; and digital leadership. Repositioning also includes: premium drinks with an upgraded espresso experience; “better for you” food items; and new ad agencies in 2018. Dunkin’s menu strategy is to: grow and protect its core; leverage its upgraded espresso drinks into a greater reach with a younger demo and new afternoon occasions; and drive traffic with innovation & national value (Go2s). While 1H19 traffic continues to decline, improving sales trends were attributed to: rebranding; foray into national value; relaunch of its handcrafted espresso platform without diminishing speed; app improvements; intensive focus on training; and better execution. Also, corporate reported a nice improvement in guest satisfaction scores throughout 2Q19, reflecting operational improvements. The chain’s NextGen new build/remodel image represents a significant improvement, particularly as it relates to incorporating elements that will speed service and facilitate mobile ordering and to-go. 500 NextGen stores (remodels & new builds) are expected to be completed by year-end 2019 with the pace of remodels doubling the historic rate over the next couple of years. All-the-same, the brand still has to prove that it can overcome a trend of declining annual sales growth since 2011 which reflects: increasing c-store/QSR coffee competition (discounted coffee used to drive traffic); PM sales softness which may reflect impact of coffee discounting on a less ritualistic daypart and MCD’s breakfast all-day initiative; declining industry breakfast business growth; and cannibalization driven by development in mature markets. Dunkin’s relatively low average ticket and AUV reflects the tricky challenge for this mid-positioned coffee player to drive traffic with value and check with premium products. In conclusion, Dunkin’s work is to translate a complete and thoughtful repositioning into sustainable traffic growth and this is no easy task as it requires the brand to compete with the ongoing coffee value war at the bottom while trying to cajole the brand’s core base of middle America to the upside.
