Starbucks, Dunkin' Donuts, and McDonalds: Dunkin' Wins

Starbucks (SBUX)

Too bad you can't buy shares in Dunkin' Brands, Inc. as they are a private company.  Dunkin', which opened 171 new stores in 2009, now has 6,566 U.S. stores. Starbucks (NASDAQ:SBUX), which has recently closed several hundred stores, has 6,871. Dunkin's "deliberate targeting of the no frills, cost-conscious coffee drinker who doesn’t want to buy a CD on his way to work has been enormously effective. "

Dunkin' Brands, Inc.
dunkin vs starbucks image from http://blog.seattlepi.comDoughnuts and ice cream make sweet bedfellows at Dunkin' Brands. The company is a leading multi-concept quick-service franchisor that operates both the Dunkin' Donuts and Baskin-Robbins chains. It has about 15,000 franchise locations operating in more than 40 countries. With more than 9,000 units in 30 countries (about 6,400 in North America), Dunkin' Donuts is the world's leading chain of doughnut shops. Baskin-Robbins is a top ice cream and frozen snacks outlet with its more than 6,000 locations (2,600 in the US). Dunkin' Brands is owned by a group of private investment firms including Bain Capital, The Carlyle Group, and Thomas H. Lee Partners.

(TheBigMoney.com) Starbucks Vs. Dunkin' Donuts | Dan Mitchell

"It's no secret," writes Melanie Warner at Bnet, that Dunkin' Donuts is expanding in order to become "as annoyingly ubiquitous as Starbucks."

It's already almost there. As Warner notes, Dunkin', which opened 171 new stores in 2009, now has 6,566 U.S. stores. Starbucks (SBUX), which has recently closed several hundred stores, has 6,871. And because Dunkin' has very little presence in the West, while Starbucks stores are pretty uniformly distributed across the country, Dunkin' has a lot more room to grow.

Warner writes that Dunkin's "deliberate targeting of the no frills, cost-conscious coffee drinker who doesn’t want to buy a CD on his way to work has been enormously effective. "What Dunkin’ Donuts seems to have figured out," she continues, "is that there’s a large segment of the population that doesn’t care to figure out what a venti is. They’re not ever going to order a skinny half-caf soy caramel Macchiato. Instead, they like consistent, decent tasting, old fashioned drip brew coffee that doesn’t cost more than $2."

Ah, but that's only partly true. The real issue is that Dunkin' no longer does sell a "decent tasting, old-fashioned drip brew coffee." They sell good coffee. When it comes to the basic cup, it's as just about as good as Starbucks'. So is McDonald's (MCD) coffee. And 7-11's. Just a few years ago, this wasn't true: Starbucks was usually the only place in town to get a decent brew. Further, Dunkin' has a lot more than just basic coffee. You might not be able to get a "skinny half-caf soy caramel Macchiato" there, but you can get a "caramel swirl latte," and any number of other espresso drinks and flavored coffees.

Good coffee is now a commodity. And while Starbucks still has the edge on complicated coffee drinks, they, too, are becoming ubiquitous. The more true this becomes, the more Starbucks will have to compete on price. This is the company's biggest challenge. The irony, of course, is that Starbucks did more than anyone to make it happen.

SOURCE: http://www.thebigmoney.com/blogs/daily-bread/2010/03/19/starbucks-vs-dunkin-donuts

 

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