Dunkin' brewing up big innovation

by Monica Watrous
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Seasonal flavors figure into Dunkin' Donuts' product development.

DALLAS — Croissant donuts, steak burritos and mango smoothies are set to debut at Dunkin’ Donuts in the coming year.

Driving product development and marketing plans at the chain are a half-dozen strategies developed to deliver continued growth through the remainder of the fiscal year and beyond. Executives of Canton, Mass.-based Dunkin’ Brands Group discussed the initiatives during the company’s investor and analyst day on Sept. 17 in Dallas.

A key component of Dunkin’s six-fold plan is protecting its critical breakfast day part and growing its afternoon business through consumer-focused innovation. Dunkin’ introduced more than 40 products last year and plans to launch more than 40 over the coming year.

“And in the past, what really anchors our product strategy, our platforms, which are broad product categories that are available all year round, along with L.T.O.s (limited-time offers),” said John Costello, president, global marketing and innovation for Dunkin’ Brands.

Beverages generate 57% of Dunkin’ Donuts’ sales, while bakery products account for 23% of the business, and food represents 16%. Two-thirds of Dunkin’s food products are sold in the morning and a third are sold in the afternoon, but all menu items are available all day long.

“So, there's people eating a Big n' Toasted at 4 p.m. in the afternoon, and there's people having a turkey sandwich at 6 a.m. in the morning,” Mr. Costello said. “And so, what it shows is really two things: the strength of the morning day part, but also the significant upside of the afternoon day part.”

Dunkin' said it leads the market in the iced coffee category, supported by such limited-time offers as a line of flavors inspired by Baskin-Robbins ice cream.

 

Beverage innovation

In hot coffee, the chain’s most important category, new blends provide a buzzworthy platform to attract new users to the brand. The chain is set to launch a dark roast nationally in September.

“It really has the strength and flavor of a dark roast, but it's unusually smooth without the bitter over-roasted taste that you see in many other dark roasts,” Mr. Costello said.

Dunkin’ leads the high-growth category of iced coffee, which is popular among millennials.  Recent innovation includes a launch of limited-time flavors inspired by ice cream at Baskin-Robbins, which Dunkin’ Brands also owns.

“And it has a double benefit of providing variety for iced coffee drinkers, but also providing awareness for the Baskin-Robbins brand because these are national L.T.O.s,” Mr. Costello said.

Capitalizing on its popular Coolatta line of frozen beverages, Dunkin’ is testing a new blender platform “that enables an entirely new class of beverages,” including the chain’s first ever smoothie offerings.

“So, in our test markets, we're offering smoothies for the first time in flavors like strawberry, strawberry banana and mango,” Mr. Costello said. “It enables us to offer an unsweetened version of Coolatta, the Coolatta Light. So, think about the popularity of those Coolatta beverages and now the ability to offer a Coolatta Light as well as a frozen Dunkaccino, which is a proprietary Dunkin' drink that's a combination of chocolate and coffee. So, this blender platform is in test market right now, generating very strong results, and we're very encouraged about its potential to be a new platform.”

Tea is another growing category for the brand. Dunkin’ offers sweet tea in southeast markets.

“Hot tea is an area where we have a modest business, but a lot of potential there,” Mr. Costello said. “But here, again, the potential for entirely new platform growth in that.”

The chain plans to roll out its steak platform nationally in November with such items as burritos and wraps.

 

New breakfast and snack options

In breakfast sandwiches, the company recently expanded its capabilities and offerings with new chicken and steak platforms, which include wraps and burritos. The proteins provide opportunities across day parts, and limited-time offers may be driven by sauces and carriers, reducing operational complexity while creating menu news.

What the chain calls “p.m. snacking” represents an increasingly important platform for Dunkin’ Donuts. New items include a soft pretzel twist, miniature cookies and supreme bagels, which are chewy plain bagels served warm with such cheesy, flavorful toppings that include pepper jack and spinach artichoke.

Adding breaded and grilled chicken to the menu has expanded Dunkin's capabilities for limited-time offers and core menu items.

For all its innovation in sandwiches and snacks, however, the company has not abandoned development around its namesake offering. In the first half of the year, donut sales benefited from seasonal launches, such as heart-shaped donuts that led to all-time high donut sales, as well as core introductions. Dunkin’ is testing a croissant donut in select markets with plans to market it nationally.

“So a new coffee platform, a new chicken platform and a new steak platform that will not only provide a reason, in our mind, for optimism in Q4, but will have sustaining sales potential in 2015 and beyond,” Mr. Costello said.
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