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Coffee Wars: Is Dunkin’ Donuts More Valuable Than Starbucks?

Dunkin' Donuts may soon really be able to live up to its slogan -- "America runs on Dunkin'".

Dunkin' Brands Group (DNKN) raised roughly $423 million after its IPO priced above expectations Tuesday evening. The company sold 22.25 million shares priced at $19 each. After prolonged delay Wednesday morning, the stock jumped more than 30% when it opened for trading and was recently fetching nearly $27.

The company is set to use the funds to pay down debt and expand the Dunkin' Donuts brand across the Midwest and to the West Coast. Dunkin', which ranked #1 ahead Starbucks in terms of customer loyalty over the last five years, plans to double U.S. storefronts over the next two decades.

Right now the chain operates only 100 of its 6,800 stores outside the Northeast. That means a new store and fresh cup of joe could be coming very soon to a location near you!

But the expansion of the blue-collar, no-frills brand could have negative implications for small local coffee shops and it could even stir up a brewing rivalry with high-end retailer Starbucks. Check out this video spot released after Dunkin' conducted a consumer taste test: Dunkin' Beat Starbucks. (If those aren't fightin' words, then what are?)

If you're not familiar with the Dunkin' way, you can expect good coffee at a good price and even a few food options that go beyond the obvious choice of donuts. From a consumer perspective, part of Dunkin's success is the fact that it has really stuck to its roots, says Dan Gross, Yahoo! Finance economics editor. It has grown its menu selection without adding complicated, confusing and trendy options like Starbucks' $4 latte.

Another difference between Dunkin' and Starbucks brands is the potential for growth, as Aaron Task points out in the accompanying clip. Since Starbucks has already saturated many U.S. markets it must look abroad to grow its business. Dunkin' on the other hand, has the opportunity to expand across nearly the entire U.S.

As noted, the IPO beat the expected range of $16 to $18 per share. The company was hoping shares would price at least in the mid-rage at $17 per share to give the Dunkin' Brands Group a market value of roughly $2.5 billion. "Based on those figures, the company's shares would trade at 3.7 times 2010 sales, a richer valuation than Starbucks, which at the close of trade on Monday traded at 2.8 times calendar 2010 sales," reports Reuters.

In the latest installment of The Daily Dish, Aaron and Dan discuss the Dunkin' Donuts vs Starbucks rivalry and what the Dunkin' IPO means for consumers.

Stay tuned for additional coverage and tell us what you think! Are you a Dunkin' Donuts or Starbucks fan, and do you think Dunkin' is worth more than Starbucks?

For more coverage like this, see:

How Domino's Delivered a Tasty Turnaround

American Fast Food: From Supersize to Downsized

Onward: CEO Howard Schultz on How Starbucks Got Its Groove Back

Does Going Upscale Make Sense for McDonald's?