Dunkin' Donuts raises millions, helps fund West Coast expansion plans
Dunkin' Donuts sells more coffee than doughnuts and, like McDonald's, makes no secret about going after Starbucks' customers.
Seattle Times business reporter
Anyone who thought Dunkin' Donuts was going to stick to the eastern United States had better get ready for some bright pink and orange coffee cups.
The Massachusetts chain's parent company — which includes the ice-cream franchise Baskin-Robbins — begins trading publicly Wednesday, after raising $428 million that will help propel it toward the West Coast.
Known for light-roasted coffee and a downscale grab-and-go ambience, Dunkin' Donuts sells more coffee than doughnuts and, like McDonald's, makes no secret about going after Starbucks' customers.
With the new cash infusion, it has more money to do that. Analysts say Starbucks still has the edge, but that Dunkin' will pose a greater threat, particularly internationally.
Dunkin' casts itself as an unpretentious alternative to Starbucks.
"My mouth can't form these words," a befuddled group of coffee drinkers sang in a 2006 TV commercial for Dunkin' Donuts, which pulled out of Washington in 2002 and no longer has stores here. "Is it French or is it Italian? Perhaps Fritalian."
They did not name Starbucks but were obviously referring to its menu, which has its own vocabulary — referring to items like medium-sized coffee milkshakes as grande Frappuccinos.
Dunkin' also hired former Starbucks executive Paul Twohig in 2009 to be its U.S. chief operating officer.
"Ultimately Starbucks has more of a competitive advantage, but Dunkin' is an interesting story because it hasn't hit the national saturation levels that Starbucks has," said R.J. Hottovy, an analyst at the investment research firm Morningstar.
Starbucks has about 11,000 U.S. stores. Dunkin' has 6,800 — and just 109 of them are in the West. "We believe that the Western part of the U.S. represents a significant growth opportunity for Dunkin' Donuts," the parent company said in a securities filing.
Despite the small footprint in the West, many people here know it because its coffee is sold in grocery stores nationally.
Dan Geiman, research director at McAdams Wright Ragen in Seattle, said it's hard to know whether Dunkin' will play well in the West. "It's a concept with tremendous loyalty," he said. "The lines in Boston are long, and the stores are jammed, but it's hard to say how it will catch on in the West."
Dunkin' could create a bigger headache for Starbucks internationally, analysts said.
Although Starbucks has 6,000 international stores — to Dunkin's 3,000 — there remains lots of room for growth, particularly in emerging markets.
For example, both companies are preparing to open their first shops in India.
Melissa Allison: 206-464-3312 or email@example.com
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