Dunkin’ president: Consumers want products ‘they can share on Instagram’

Dunkin' President Scott Murphy joins Yahoo Finance Live to talk about the company's new rewards program, the future of coffee and donut sales, and what its customers want in the brand.

Video Transcript

[AUDIO LOGO]

BRIAN SOZZI: America has long run on Dunkin', but a change in the company's Rewards program has some loyalists rethinking where they go for their java run. Let's talk more about all things Dunkin' and what's on the menu here with Dunkin' President Scott Murphy.

Scott, great to get some time with you, coming to us from inside a Dunkin' location. Curious of what you're seeing in traffic? There's so much economic cross-currents coming at consumers right now, what does that breakfast daypart look like?

SCOTT MURPHY: Yeah. And, first of all, thanks for having me. I really appreciate it and can't wait to talk about our new loyalty program, Dunkin' Rewards. In terms of traffic, I've been listening to your segment all morning on inflation and everything that's going on with the consumer, we feel really good about the breakfast segment.

We feel really good about our brand and how we stand tall. People need their coffee and their breakfast sandwich to start their morning. So we've seen really strong results for our brand in the last couple months.

BRIAN SOZZI: Scott, full stop. I was critical to changes in the Rewards program, but-- but it's coming from a place of love. I have the Dunkin' app. I go to Dunkin all the time. And a lot of other people seem to have caught my vibe. Have you looked at what you've made here and are making any changes now to respond to consumers?

SCOTT MURPHY: Yeah, so-- and I know it comes from a place of love from you, Brian, absolutely. Here's what I would say. We rolled out our Dunkin' Perks program in 2014, and we haven't made any changes in the last eight years. And we went out and we talked to our core users, and we said, what do you want from a program?

And they said they wanted three things. They wanted more variety because in the old program you could just get a beverage. They wanted more flexibility, and we've now given them a chance to stack points so they can buy a drink for themself. They can buy a sandwich for their family or a whole meal for the soccer team.

And they said they wanted recognition. So big users like you want to be recognized, and we now have a Boosted Status. And so we've put those three things in place. We're really excited about this new program. We gave out 4 billion free points in the last three days. And the response has been overwhelmingly positive.

BRIAN SOZZI: OK. Fair enough. That's good to hear. But the birthday drink is the industry standard. Like, I know I would like to get a free birthday coffee until I ultimately drop dead and 6 feet under. I mean, do you think you'll bring that back?

SCOTT MURPHY: So we're talking about that, for sure, Brian. But one thing we did do is while we did take that piece away, what we added is come in either the day before your birthday, the day of your birthday, or the day after, get three times points, points that won't expire as long as you come a couple of times a year.

And you can actually get something besides just a beverage. You could get a donut. You could get a sandwich. You can get avocado toast. A lot more flexibility, which is what our guests wanted.

BRAD SMITH: So you're really monitoring some of the taste profiles, the trends on what consumers are moving towards in their purchases for anything from lunch time to starting off the day. So where are you still seeing the most traffic, at what point in the day, to really make some of the menu decisions and changeovers there?

SCOTT MURPHY: Yeah, we're certainly a morning daypart business. So 70% of our business happens before 11:00 AM. And honestly, when COVID happened and we had that shutdown, we were all very nervous when the commute was not happening. But people shifted their behaviors a little bit, and they came to us a little later in the morning. And they came for a couple of beverages, maybe to share with their spouses while they're working at home.

But really, the trend that's happening is all around iced beverages. And we invented iced coffee. We're a leader. Whether it's iced coffee, whether it's cold brew, our new refresher line, it's all about iced beverages and great attachment with snacking items to that.

JULIE HYMAN: Hey, Scott, it's Julie here. I mean, I got to say it's like-- I guess I want to know a little bit more about the whole recession spending patterns, et cetera because you sound super positive. And I'm just wondering what signs, if any, you see of trade down, for example, of a drop in traffic, of any kind of sign that the anecdotal and data pain that we are talking about every day, if you guys are seeing any evidence of that?

SCOTT MURPHY: Yeah, we do see some of it. And here's what I'd say anecdotally. What happens in our business is when things happen like fuel prices or you see other spikes in inflationary environments, people pull back a little bit, and maybe they stop coming quite as frequently to a Dunkin' or some other restaurant.

But especially with Dunkin', I think after a couple of days or a week, people realize they need their morning Joe to get started, right? They need their coffee to fuel their day. And we've seen it come right back up.

And I think uniquely positioned for us, Dunkin', it is a value offering, right? So we've got great products, both beverage and food, at a great price point at the speed of Dunkin'. I think that's an unmatched combination out there.

BRIAN SOZZI: Scott, I go to my local Dunkin' every Saturday, and it's just a ritual I have. And every time I'm in line, the lines are huge in the morning, which is a good thing, I'm sure, but everybody's buying coffee, notably iced coffee. How big a percentage is donuts now on your business? And what does that menu look like?

SCOTT MURPHY: Yeah, donuts are about 20% of our product mix right now. You're right, iced coffee is the future. That-- last year was the first year we sold more iced beverages than hot beverages. That's what the next generation of consumer wants. They want these iced cold beverages. They want highly colorful products that they can share on Instagram.

But I will say our donuts, no one does donuts like we are. We are obviously a national and a global leader on donuts. You've got to come try our Spider Donut, which we just rolled out for Halloween. We've got a Jack-o-Lantern Donut. There's nothing more shareable and more fun and a nice treat to yourself than a donut.

BRAD SMITH: As you've got more people returning either to office or to schools, that breakfast war that's continuing to brew and heat up, what's Dunkin's positioning in that breakfast war? And what are going to be the keys to essentially helping it retain that consumer mindshare and that dollar at the beginning of the day?

SCOTT MURPHY: Yeah, a couple things. First of all, we have an incredible brand with a lot of brand love. So we tap into that loyalty, like that new program. The second is some degree of everyday value or targeted digital value. So through our app, we are going to have the ability to have laser-focused offers that go right to you and what you want and give you incredible value in our program.

And then the last thing I'd say is we've got, through our app, our ability to order ahead. So, Brian, when you see those long lines, you download the app, order ahead. It'll be ready when you get there. And the crew will hand it to you, and you'll be off and running for your busy day.

BRIAN SOZZI: Scott, I just-- I need the birthday drink back. I'm going to Dunkin' anyway later. I'm going to get off of here. I'm going to Dunkin'. I just need the birthday drink back, please, please.

SCOTT MURPHY: Brian, I'm going to come deliver coffee to you personally on your birthday, how about that?

BRIAN SOZZI: I'll take that. April 4. There we go.

BRAD SMITH: Done. Deal. Dunkin' President Scott Murphy, thanks so much for joining us this morning. Appreciate it.