Dunkin Donut’s brand renaming strategy

When Dunkin Donuts was established they had very few competitors. Fast-forward to today and one can observer that the brand has significant competition. McDonald’s and Starbucks for example have risen to become a dominant provider of coffee and food. (Olenski, 2017). The question at hand is whether or not Dunkin Donuts is losing money. While Dunkin is experiencing challenges it is important to note that their sales have show slight increases and stagnanticity in recent quarters. (Team, 2017a). Yet when Dunkin is compared to Starbucks, the stock price is incomparable as Starbucks has seen a 30% increase in their stock price. Olenski, 2016).

In the face of fierce competition and ever sinking profits. Dunkin Donuts could benefit from a new strategy. Changing not only their name but also their offerings. Dunkin strategy to focus more on coffee and beverages is wise, as the majority of their profitability has come from the beverage portion of the business. Beverages are more profitable while traditional Dunkin foods and Doughnuts are labour intensive to produce. If Dunkin Donuts changes their name it will underscore the shift to a beverage centric business model. A second possible benefit of the name change is that a abbreviated names make implementation of electronic applications more feasible for setup identification /recognition and use. Dunkin donuts can even make room for a new electronic psychological connection to the word Dunkin and their current picture to retain loyal beverage customers. Last removing the word “Donuts” plays into the new health conscious consumer that is particularly concentrated in California. It removes the logical connection that consumers make to coffee and donuts combination out of the equation in consumers’ mind even if they may consume and equally unhealthy beverage. The should also include an impetus to the company to recreate and simplify there current pastry offerings. This will help consumers make quicker choices and routine as well as make sales easier at the store level.

Whether the change will help the company is an open question. The company has various angles to its new strategy, according to Team (2017b). The four angles Team writes of are to increase its digital presence and take advantage of digital opportunities to build its business, to create stronger ties with the local franchisees, to streamline the menu, and to innovate and differentiate its product line. It should be noted that a change to the Dunkin’ name from the company’s traditional name will be reflective of these changes, and not a driver of the changes.

Dunkin’ has been able to make significant inroads in the use of technology by customers. The company’s app allows customers to order from the road, come into a store for a pickup of the order, and bypass the line (Team, 2017b). Team also writes of a partnership with the navigation service Waze. They have created a rewards card that is reasonably successful. Doughnuts have a traditional feel to them. They hearken back to the 1950s, when people would actually dunk doughnuts into their coffee while sitting at a diner. The electronic forays of the company, in contrast, feel very 21st century. Dropping “Donut” from the name is in synch with this modernization.

As for the other strategic plan factors, a change in name away from “donuts” will not do much to help relationships with franchisees, but it certainly meshes well with the idea of simplifying the food offerings and innovating in the recipes for its foods. For example, the Team (2017b) notes the strategic plan is to remove artificial ingredients from some of the offering, including pastries. It is well known that doughnuts are fried in oil before they are baked; a process that does not bring sustainable good health to mind. Finally, Olenski (2016) writes about the partnerships that the company is making in the sporting world, particularly basketball, where an agreement has been reached with the Philadelphia 76ers to be an official food supplier at games and offer rewards cards discounts. “Dunking” is a big part of basketball. “Donuts,” not so much. A change in name could help build more partnerships like this for a game that is one of the most popular in the world.

Whether it is a Good Ideas to be Testing the New Name in California

This is an outstanding question. Dunkin brands began in the east (Olenski, 2016). The company has opted to try out the new name at a single location, in Pasadena, California, and then make a determination about whether to make the new name go across the entire brand in 2018 (Orlando, 2018). One of the reasons that the company chose California is that the brand is thinly represented here, with less than 50 franchises across the state.

One good reason to try the new brand in California is that there is the possibility of the equivalent of a clinical trial. The company could put two new franchises in an area with similar business conditions and similar demographics. For example, the new store in Pasadena might match up with a new store in, say Ventura, and then see how the results come in., In this case, the lack of brand penetration into California is a plus, because people will not be influenced by prior perceptions of the company.

On the other hand, California is an expensive place to do business. It is has a heavily regulated business environment compared to, say, Nevada. There are many regulatory pressures, like strong state minimum wage laws, that might cut into profits or create costs of doing business that might be fewer elsewhere. For that reason, it might have been better to try this experiment in a low-regulation state like Nevada, instead of California.

Whether Dunkin’ is Trying to Compete with Starbucks

It might be better said that Starbucks came into the coffee business, found a niche for itself, and completed successfully with Dunkin’. As the Trefis Team (2017a) explains, Dunkin’ is trying to fight back, introducing a style of frozen coffee that presumably will do battle with the many iced varieties at Starbucks. Daniels (2016) discusses all the various ways that Dunkin’ and Starbucks are now in competition; the competition does not always favour Dunkin’. For example, a ten ounce cup of coffee at Dunkin’ is more expensive than the equivalent amount of coffee at Starbucks, the author says. He goes on to explain that in order to keep up with rising costs, Dunkin’ raised its prices in 2016, which is never a good idea for the challenger in a competition (Olenski, 2017). Finally, Dunkin’ is making a move into a marketplace in California where Starbucks is already well established (Daniels, 2016). Peculiarly, Dunkin’ might have done better by playing to the nostalgia factor of former residents of the east who now are in California, but had been cut off from Dunkin’ Donuts by geography. In the short run, that might have been more profitable. That said, it is well known that the Krispy Kreme doughnut chain was a huge success some years ago, but is far less profitable now mostly due to consumer burnout. Dunkin’, if it is going to compete with Starbucks, must do it in a way where it can feature offer competitive products, which leads into the next discussion of the new focus on beverages.

Whether it is Good for Dunkin’ to Focus on Beverages

With its focus on the beverage business, Dunkin’ is making its model simpler, and featuring a line of products that franchisees can sell easily. Coffee can be sold in so many places, such as the aforementioned sports stadiums (Olenski, 2016). Consumers see Dunkin’ brand coffee in the supermarket, so there is room for cross-promotion that way. The company is also experimenting with new offerings, Olenski (2016) writes, like Turkish coffee that can be sold in the Middle East. Team (2017b) notes other drink innovations. The company is almost entirely franchised. A simpler, beverage-focused menu may mean that stores may be smaller and easier to staff, which can attract new franchisees. Overall sales may slump a bit, but if costs are concurrently reduced, these stores may still be very profitable.

References

Daniels, J. (2016, February 03). Soon we'll see how much America runs on Dunkin. CNBC.com. Retrieved September 18, 2017, from https://www.cnbc.com/2016/02/03/dunkin-earnings-challenging-times-for-coffee-chain.html

Olenski, S. (2017, March 06). Time to make the donuts: how the Dunkin' donuts brand stays relevant. Forbes. Retrieved September 18, 2017, from https://www.forbes.com/sites/steveolenski/2017/03/06/time-to-make-the-donuts-how-the-dunkin-donuts-brand-stays-relevant/#7885c5265556Time

Orlando, D. (2017, August 22). Dunkin' Donuts takes shorter name for test drive. Nation’s Restaurant News. Retrieved September 18, 2017, from http://www.nrn.com/beverage-trends/dunkin-donuts-takes-shorter-name-test-drive

Team, T. (2017a, May 15). Menu Innovation Should Drive Sales For Dunkin' Brands. Retrieved September 18, 2017, from https://www.forbes.com/sites/greatspeculations/2017/05/15/menu-innovation-should-drive-sales-for-dunkin-brands/#34facb6860e0

Team, T. (2017b, June 22). Examining Dunkin' brands' growth strategy. Forbes. Retrieved September 18, 2017, from https://www.forbes.com/sites/greatspeculations/2017/06/22/examining-dunkin-brands-growth-strategy/2/#263c1f79447a

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