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Dunkin’ Proves it Can Run on Espresso

Danni Santana
Dunkin’ Proves it Can Run on Espresso

After an aggressive espresso rollout flattened same-store sales late in 2018, Dunkin’ got back on track, and then some.

The coffee chain reported its best comparable sales performance in four years of 2.4 percent in the first quarter, propelled by new drinks and value menu offerings. Beverages, led by espresso, also witnessed their best sales increase since 2016, CEO David Hoffmann told analysts.

A year ago, Dunkin’ reduced its menu by 10 percent, allowing the chain to make room for espresso, cold brew, and healthier snacking options, such as its Power Breakfast Sandwich. The company earmarked $100 million to the initiative, 65 percent of which went towards installing espresso equipment in upgraded stores.

“Last year, we took some big, but carefully calculated risks to set our business up for success,” Hoffman said. “While we are still very much in the early innings and early stages, we are seeing the progress and more importantly, we are seeing the results of [our] blueprint for growth.”

Focusing On Convenience

Menu innovation alone was not enough to return Dunkin’s store traffic back to positive levels. But the company believes offering more convenience via its digital channels will increase visits from younger consumers, which helped improve espresso sales by 30 percent last quarter.

“When you look at the espresso customer versus the drip coffee customer, espresso customers skews younger and has higher eruption to digital than the drip coffee user does,” said Hoffmann. “We think we tapped into a much more savvy digital consumer than what we had before, and that was all part of getting into that espresso lineup.”

By reducing the amount of steps required to order via Dunkin’s mobile app, the chain saw average weekly sales increase by 25 percent year-over-year, Hoffmann said, which accounted for 4 percent of total transactions. Dunkin’ is also pleased with the progression of its Grubhub partnership, echoing Grubhub CEO Matt Maloney’s comments the week before.

Maloney called Dunkin’ a “high priority partner,” noting that both companies plan to “aggressively expand” the pilot program.

Dunkin’s Hoffman confirmed this, saying that his company will quickly scale up testing to larger markets.

Dunkin’s system-wide sales grew 5 percent in the first quarter, while revenue soared 6 percent to $319 million. Subsidiary Baskin Robbin’s same-store sales decreased 2.8 percent in the quarter, due to declining store traffic.

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