Dunkin' Donuts shifting focus from a.m. to p.m. in 2018

by Monica Watrous
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Dunkin' Donuts coffee and donuts
Dunkin' Donuts focused on its morning performance at restaurants in 2017.
 

CANTON, MASS. — For Dunkin’ Brands Group, Inc., 2017 was all about perking up morning performance at Dunkin’ Donuts restaurants in the United States. In 2018, the company is shifting focus to the afternoon daypart.

David Hoffman, Dunkin' Brands
David Hoffman, president of Dunkin’ Donuts U.S. and Canada

“... we are especially pleased that morning traffic numbers in Q4 were the strongest they’ve been in two years and improved throughout the last three quarters of the year,” said David L. Hoffman, president of Dunkin’ Donuts U.S. and Canada, during a Feb. 6 earnings call. “On top of strong morning performance, total beverages reported the highest sales growth numbers of the year after improving sequentially each quarter. These results are a direct reflection of the strategy we set going into the year, and we are pleased with the headway we have made around solidifying our dominant position as a leader in morning beverages.”

Net income at Dunkin’ Brands Group in the year ended Dec. 30, 2017, was $350,909,000, equal to $3.86 per share on the common stock, up 79% from $195,576,000, or $2.14, in the prior fiscal year. Revenues increased 3.8% to $860,501,000 from $828,889,000.

Fourth-quarter net income was $195,492,000, or $2.17 per share on the common stock, up 248% from $56,120,000, or 61c, in the year-ago period. The sharp increase was driven by a net benefit from income taxes due to the enactment of the tax reform.  Revenues totaled $227,139,000, up 5.3% from $215,705,000.

Dunkin' Donuts coffee beverages
Dunkin's beverages category reported the highest sales growth numbers of the year.
 

For the full year, Dunkin’ Donuts U.S. comparable store sales grew 0.6% and Baskin-Robbins U.S. comparable store sales were flat, while Dunkin’ Donuts International sales rose 0.3% and Baskin-Robbins International sales slipped 0.1%. In the fourth quarter, all four segments posted gains, with Dunkin’ Donuts U.S. and Baskin-Robbins U.S. comparable store sales up 0.8% and 5.1%, respectively, and Dunkin’ Donuts International and Baskin-Robbins International up 1.6% and 3%, respectively.

At Dunkin’ Donuts U.S., “we made a strategic decision to focus last year’s efforts on strengthening our beverage leadership in the morning daypart, where the majority of our sales take place,” Mr. Hoffman said. “This intentional commitment was the result of extensive consumer research, historical sales analysis and thoughtful assessment of our long-term growth opportunities. In setting our strategy, we believe that a deliberate focus on the morning daypart, coupled with a significant menu simplification effort, would ultimately create the greatest room for long-term growth, even at the cost of stunted short-term sales results...

“With our new simplified menu slated to be rolled out nationally by the end of March, we can now shift our focus to developing revamped, easier-to-execute afternoon offerings that will reinvigorate our p.m. business and build off of our morning success.”

Dunkin' Donuts packaged products
During the fourth quarter, Dunkin' Donuts grew out-of-restaurant retail sales of branded packaged products by more than 30%.
 

A key part of the company’s strategic blueprint is building brand awareness through consumer packaged goods in grocery stores. During the fourth quarter, the company grew out-of-restaurant retail sales of Dunkin’ Donuts branded packaged products by more than 30%. Across both Dunkin’ Donuts and Baskin-Robbins brands, total C.P.G. sales reached $850 million, including $150 million in ready-to-drink sales, for the year, Mr. Hoffman said.

“Value wars among Q.S.R.s fighting for market share, a cold and snowy January slowing traffic, minimum wage increases and low unemployment, these are all realities we are seeing and feeling in our business,” Mr. Hoffman said. “All of these reasons are why our blueprint strategy is so critical right now. As we shift to an execution mode, you will hear us talk more this year about the headway we are making to boost menu innovation, deliver unparalleled convenience to our guests through digital leadership and increase accessibility to our brand through new-store development and C.P.G.” 
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