Despite building a brand centered around its infamous doughnuts, Dunkin' Donuts, the flagship brand of the Dunkin' Brands®, is transitioning to the beverage industry. The company has shifted its focus from doughnut to beverages in the past 10 years for a reason—higher margins, reported QSRWeb.com.Speaking at the Bank of America Consumer & Retail Conference in New York this week, Dunkin’ Donuts’ CFO Paul Carbone said, "We all love Fred the Baker, but we're a beverage company. It's not going to be time to make donuts anymore; beverages are the holy grail of profitability."
Dunkin' has already made changes to its in-store queues, such as highlighting beverages, featuring beverage photos on digital menu boards, training managers to offer beverage samples as opposed to doughnuts and bringing beverages to nearby businesses when a new store opens. Carbone said the "top line" has gone up incrementally because of these changes.
However, marketing Dunkin' as a beverage company is a challenge in terms of expanding internationally. Carbone said it's still often thought of as a doughnut destination in most global markets.
Breakfast sandwiches also are boosting business with the help of the company's 12 limited-time offers (LTOs) a year. For 2013, the company already launched its turkey sausage breakfast sandwich in January, heart-shaped brownie batter donuts in February, and the Angus steak wrap in March.
"We have perfected this strategy of 12 LTOs a year. We have a very deep pipeline; it's never been deeper, and it's both new products and a twist on older products," Carbone said.
Carbone also discussed Dunkin's new app that was introduced in September 2012 and reached more than 1 million downloads by the end of the year. It also sped up service times and boosted one-on-one marketing efforts with location-based offers.
"It allows us to talk to the consumer more and what that has done is set us up for loyalty," said Carbone. Mobile loyalty is a 2013 project for the company with focuses on payment migration and behavior migration.
Payment migration means moving people from Visa and MasterCard to My Dunkin' Card, said Carbone. "What this does is lowers transaction costs and improves franchisee profitability and (the company gets) all the data," he added. Behavior migration is the use of that data for marketing and promotions.
The loyalty effort creates both opportunities and challenges for the franchise model. "We have to figure out that customer acquisition piece in a franchise, Carbone said, "but we are actively working on it and we'll launch something this year."
