How Dunkin' Donuts' CEO plans to compete against Starbucks

Dunkin' Donuts is building on its red-state coffee image. Starbucks popularized Italian espresso drinks, "but we offer more of an Americanized espresso, with a more mellow blend," says DD CEO Jon Luther. Similarly, while Starbucks baffles newcomers with its "tall, grande, or venti" cups, Dunkin' sticks to small, medium, and large, at prices some 25% lower. Luther is betting there are lots more coffee drinkers who want espresso drinks at lower prices without the jiggy atmosphere. (Business Week)

Comments

[James]

someone isn't keeping up here. There is something seriously wrong with the CEO of DD, if he thinks for a second that a crappy dounot shop will win the heart of preppy trend sluts of starbucks... seriously wrong indeed. Its not even the same market! Its a great idea, you will create a more loyal clientel with better prices and more insentive to keep going to DD rather than going to SB but realistically YOU SELL FUCKING DOUNUTS YOUR CRANK!

[le j.]

spell-check dearest james, spell-check.
(bad grammar seriously negates even the most
cohesive of arguments, which yours was not.)

and go dunkin' donuts!
the race between the two purveyors of
america's most grotesque coffee is on!

[kellan]

"Dunkin' Donuts is building on its red-state coffee image"

I'm trying to figure out how such a quintessentially New England brand as DD could be described as have a "red-state" image.

[brian w]

Did the CEO of Dunkin' Donuts actually use the word "jiggy" or was that a paraphrase? Heh.

[melina]

as long as they serve coffee, i really don't freakin' care.

but, nobody and nuthin' can *be* starbucks.

starbucks is starbucks.

often imitated, but not duplicated (can't remember who originally made up that ditty)

[BarHopTheWorld]

DD's red state appeal is driven by the same factors that make Wal*Mart so popular. Low price point, no frills environment and disregard for health.The same people that order a non fat latte and (what they assume is healthy) a RFCIN coffee cake are the same people that choose to shop at small local boutiques rather than big box stores. I believe DD may do well in regard to coffee in the south but generally people in the north east and west choose starbucks and similar shops for the entire experience not to have some machine churn out a drink.

On a side note, a few days ago I spoke with Coz, the Northwest regional VP for Starbucks. He told me SBUX was planing 20 - 25 new stores in south eastern washington state in the next 2 years. Thats a lot of stores.

[fangs]

Dunkin' Donuts is building on its red-state coffee image...

Dunkin' Donuts - the Piggly-Wiggly of coffee

[dee]

what exactly IS a Red State Image?????

[dyn]

If one frequents Starbucks are they "jiggy" by association? If so, should you carry a card with that on it ? Dyn...jiggy.
You know just in case you have to prove it???

[DFM]

In this case I think the writer is a few shades off in terms of color. I believe DD has more of a blue reputation, as in blue-collar. A lot of folks think of DD's coffee as more utilitarian and 'get me through the morning' material as opposed to something to savor. You're also far more likely to see a stack of empty DD cups in the back of a pickup truck leaving a construction site - not spent latte's. DD stores have traditionally been in lower to middle income neighborhoods, not the higher-end corners or malls.

DD has plenty of room to grow without ever really challenging Starbucks' niche. More than a few stories have been written about folks who go to DD during the weekday to get their fix when they're commuting, on the way to work, etc. but those same people go to a Starbucks on the weekend or in the evening to unwind.

In the end DD's brand is far more utilitarian and can grow a bit to get their customers to add espresso drinks to their orders - not necessarily take Starbucks customers away.

The major difference is that DD is a franchise operation, with store prices, products, and policies that will vary to some degree, depending upon who owns the local shop. Howard Schultz can snap his fingers and make eight thousand stores jump. DD can go to its owners and say "Hey, you know, it'd be really cool if you all did this... pretty please?"

Also, depending on what news you want to believe, when Starbucks plays dirty pool, pray that you're not in their crosshairs.

[miss barista]

What exactly is the "red-state image" you ask?

Red states were obviously not intelligent enough to elect a new president so a typical red-state citizen would be a less educated and closed-minded person. Someone who listens to foxnews and doesnt question what they hear. They'll hear a news report on Starbucks not being environmentally friendly and decide to go to DD. Later on they'll throw their cup and donut bag in the woods while hunting for animals. Red-state image is basically the people living an hour from civilization and are not intelligent enough to make coffee on their own.

[Cletus VanDamme]

Goldangit, Miss Barista, I resent that there kinda talk! Back where I come from in Punkin Nuts, Texas, we don't take kindly to you city folk badmouthing our way of life.
Just 'cause I likes to watch me the NASCAR and the pro-rasslin', and drink my dollar-twenty-nine cup of coffee with a doughnut covered in purty sprankles 'stead of a four-dollar cup with an Eye-talian name and some high-falootin' two-dollar scone, and go to church on Sundays and worship Jebus, and support our President and our troops, and fight against them Demmycrats what want to put the gay on our younguns, and shoot my gun at critters, don't make me less of an American than your latte-swilling, draft-dodging, pinko commie ass.

Bygawd it's about time we had a coffee shop what represents us upstanding Foxnews-watching folks. Didja ever think maybe the reason we don't need to question Foxnews is 'cause everthang on there is the truth, unlike Dan "Pinko" Rather and his phony baloney Microsoft Word documents? When has Bill O'Reily led us astray? Or is you just down on him 'cause some feminazi wouldn't let him rub falaffels on her like she should of?

And our President is smart, dangit! And so is the folks what voted for him. Hell, the man done went to Yale fercryinoutloud, and that's better than what I done, with the five attempts it took me to get my GED.

See, Dunkin Donuts represents the common man. Within that hot, cheap cuppa joe is everyting good about America. Don't matter what color you is, even colored folks can come in and afford a DD coffee. You see many coloreds at Starbucks? Hell, we even let Messicans buy coffee there, and I don't think there's a Messican alive can afford to eat Starbucks. Yup, that black coffee with a dash of white milk swirlin' around innit--that's like a symbol of America right there. It's the great melting cup of this great land, and it ain't right for you to impugn it.

Dangit, you got me so worked up, I'm late for my book burning down at the local library. All y'all blue staters just settle down, now, and quit making fun of out here in the real America.

[Jazer]

I think what is meant by "red-state", miss barista, is that Dunkin Donuts is looking to sell to the common American. If you look very closely at what is called the "blue-state", you will see that within that state only small portions are truly blue. 99.9% of America is "red-state" where as only large, smog creating, poluting, garbage industrious, rude centered, snobbish snorting, cities reside.

The other 99.9% of the Country likes their neighbor, doesn't pollute, lives off their country, has a garden, uses little ferilizer, and has very little garbage.

So, think what you may about the "red-state" people, but the "blue-state" people need to quit being so hypocrit and learn to be a little more wise.

JAZER

[Jazer]

Oh, miss barista, one more thing. You probably live in or near one of those pollutin' cities.

"The other 99.9% of the Country likes their neighbor, doesn't pollute, lives off their country, has a garden, uses little ferilizer, and has very little garbage."

You forgot to add they also have the highest divorce, teenage pregnancy, and domestic violence rates in the union, but still somehow believe they have a lock on family and moral values. Love those red-staters!

[Joey Jo Jo]

And don't forget that by "lives off their country" he no doubt refers to the fact that the red states take far more in tax money for various entitlement and welfare programs than do the blue states. Yup, it's those red states and their "Ah hates me tha' welfare peepulz what takes all mah hard-earned moneys" attitude that are suckling hardest at the teats of public handouts.

http://taxprof.typepad.com/taxprof_blog/2004/09/red_states_feed.html

Oh, and Dunkin Donuts coffee isn't really that good. Starbucks is much better. (Just trying to bring things back on track.)

[Kerry]

I love the fact that red-staters try to argue they are 99% of the country. Yeah so what that you have 99% of the land mass. Just because there is more land in alaska doesn't mean that what the few people that live there think is more important. Based on population, red-staters and blue-staters are actually pretty equal. The "state" portion of that label is misleading and probably what makes Jazer think that his opinions actually represent some overwhelming majority of Americans.

[STARBUCKS GOSSIP webmaster]

Let's try to get the discussion back to coffee -- and away from politics. Thanks.

[this space for rent]

I think that DD is going to have a hard time capitalizing on their coffee because their name implies that they're a DONUT shop. They're just mad that KK kicked their butts.

Amusingly, the Boston Herald (a "red-state" paper in the bluest of the blue-state cities) last year did a feature story, shortly after DD introduced their espresso drinks, in which they discovered that -- at least in Boston -- the "blue-collar," "workingman" Dunkin Donuts actually is more expensive per ounce than the "snobby," "Yuppie" Starbucks. I think that's frickin' hilarious.

[sailor]

Ok enough of the bad mouthing and enough of the crank calling. Lets just say that in the long run, its not about the "jiggy" atmosphere (what is jiggy anyway?) Its about the product. i would glady pay an extra 25% for a coffee that looks better, tastes better, and is made by someone that understands that those are not doughnut holes, they are doughnut pieces. Lets just say the consumers of Starbucks tend to be more refined than those that drink the swill sold at DD. If I want doughnuts I goto a doughnut shop, if i want coffee, I go to Starbucks.

[212 area code]

I love Starbucks and always will. I even have the visa starbucks card to prove it.Depending on my mood though, i go to either one for its differences. Dunkin donuts for its smooth taste. Starbucks for its strong espresso kick.Recently however, I find myself switching over to the dunkin donuts by my neighborhood regardless of the fact that there is a closer starbucks within a block radius from my apartment (I live by the 24 hr starbucks on Astor-nyc). My reason is that the baristas of Starbucks dont care, more often burning the coffee leaving the cup with an unpleasant gritty "bottom of the pot" taste. If your lucky, not all starbucks are like this. The dunkin donuts but my neighborhood is smoother and cleaner to the palate which is why i would trek the two extra avenues. Starbucks is still my dependable and reliable source for a strong cup of joe regardless of the time of day.

[xavier]

I try and keep my life here in Manhattan in a certain groove: downscale, without slumming. D.D., unfortunatley, qualifies as slumming.

[joe]

Slumming? I think those who are insecure to hold a cup with a Dunkin Logo has insecurities issues and probably lives in a tiny roach filled apt with a closet debt filled with designer clothes they've worked 3 jobs to support. SO you feel ashamed and downscaled so therefore you need to make it up with a designer coffee cup when you walk around in the city. Honey, it's whatever makes you feel good.
COFFEE IS COFFEE.

[Jazer]

"You forgot to add they also have the highest divorce, teenage pregnancy, and domestic violence rates in the union, but still somehow believe they have a lock on family and moral values. Love those red-staters!"

It is hard to get a divorce when you live in cohabitation instead of getting married. Domestic violence is only recorded as such when the couple is married. Since city folk don't get married but cohabitate, then divorce is low and domestic violence is really recorded as battery. Since condoms are not handed out like candy at the schools, unlike the city schools, teenage pregnancy is higher. That is not grounds for lower morals. Where as there is more sex in city schools only condoms and abortion make the teenage pregnancies lower.

JAZER

Jazer, you just proved a point. I don't think it was one you meant to prove, but you did nonetheless. And thank you, from the bottom of my heart, for the effort.

[Coffee Boy]

Coffee is coffee ?? What the hell kinda statement is THAT?

If coffee is coffee that beer is beer and wine is wine.

I suppose Joe drinks Bush beer and Boones Farm wine too...

[deusx]

Jazer...sorry....thanks for playing. Any time there is violence between two people (typically of the opposite sex) living in the same house, it's recorded as domestic violence. I just had to give testimony in a dom violence case b/c I had to pull my friend's pyscho live in g/f off him as she tried to stick her thumbnail in his eye to gouge it out.
There is more sex in city schools? Are you f-ing nuts? There is nothing to do out in the country BUT screw. I went to HS in an area so rural that the driver's ed kids had to share traffic cones with the FFA class. Kids would walk the halls with the ugly blue FFA jackets with patches all over it like it was a varsity jacket for multiple sports. It was so rural that I remember having an arguement over whether Tank's party was a shindig or a hootenanny. And ya know what? We humped like bunnies, even the jr high girls were easy. Anyone that doesn't believe me, go to Circleville, Ohio on a june Friday night and drive up and down the main drag. Teenagers are lined up on the streets, pulled into parking lots and cruising the strip looking to hook up with each other.

[Sanchez]

DD is not 'red state'. It's blue collar. They started in Massachusetts, for chrissakes. You can't swing a dead cat in most towns in Massachusetts without hitting two or three Dunks. It's a solid, working-class coffee joint.

Dunkin Donuts may see increased business, but I doubt they'll ever best Starbucks.

There are thousands of places that serve a better burger than McDonalds. Dozens of carbonated soft drinks that are better than Coke or Pepsi. Much better chocolate can be had than what Mr. Hershey's empire creates. It doesn't matter. These companies are titans not so much because of their quality but because they were the first to successfully make their brand names into household names.

Similarly, Starbucks has been very successful at mass-marketing espresso drinks to the public and associating their name with those drinks and the higher end of coffee retailing. They may not be the best, but they marketed themselves successfully before anyone else could do the same. They'll stumble and have some bad years but unless some spectacularly bad management gains control of the company they're going to remain the market leader.

Bear in mind that when the CEO of Dunkin Donuts talks about customer satisfaction, he is generally referring to his franchise operators. These are the real customers of the DD parent company. The franchisee system is a great expansion tool, you're letting someone else take all the risk of opening your new locations. Of course, you're also letting that person make a lot of operational decisions that you won't be able to control since you're not footing the bill.

Starbucks doesn't have to deal with the franchise issue. Yes, they have a licensee situation to get into airports and grocery stores, but these are handled much differently than a traditional franchise operation. The company rules those licenses with an iron first. But with the franchise headache not in the picture, the company's focus on customer satisfaction really does refer to the person at the counter buying a latte.

That franchise system also means that Dunkin Donuts workers are treated differently in every store. This has been touched upon by others in this discussion. Though Starbucks has some real "treasures" in regional and local management, for the most part workers are treated better than any other in the industry. This makes a huge difference in how they, in turn, treat the customers.

I believe Dunkin Donuts will enjoy increased revenue from their attempts but I don't see it as having the sort of impact the company is hoping for. It's going to be very hard for the general public to associate the company with anything other than donuts, especially considering the word makes up half of their name. The appeal to "ordinary" America is a cute ploy, but it won't work.

[CHRIS]

As a die hard Dunkin Donuts coffee drinker in Boston, I can say with all certianty, the Dunkin Donuts in the financial district are undoubtedly more successful than the Starbucks in the area. Because DD is a franchise there are actuall about 10 shops within a one mile radius struggling to keep up with demand. And the people waiting in line have "collars" of all colors. In order to define the patrons of DD you need to look at region not tax bracket. Unlike Starbucks DD aims to attract a wider patron base with a standard product, coffee has been the morning drink of choice long before DD and SB, let's not blow the battle out of proportion. The SB consumer base is definitely not blue collar (based on the price of any beverage beyond a regular coffe), and attracts a younger (student) crowd. The SB business model is aimed toward a smaller market and can support it with a more specialized product and higher price points. There is no competition, these are two seperate markets. I grew up the the NE and DD has been around ever since I can remember, and judging by the lines in the shops, SB has a long way to go before it takes over New England. That said SB has seen success in the academic neighborhoods (of which there are a lot of in MA).

[CHRIS]

One more item to note, Starbucks coffee may taste stronger due to the double roasting of it's coffee beans. But it is fact that the longer a coffee bean is roasted, the lower it's caffiene content. So although the coffee may taste as if it has more kick, in all actuality it's got less.

It's not double roasted. It's roasted longer. That is the only difference.

Also water to grounds proportion betweed DD and SB is different resulting in about the same amount of caffeine in both. Some med school did a study and found that SBux actually had a bit more.

DD tastes like piss water or somthing , no flavor If i had no chioce but to drink dd coffee I would not drink coffee anymore .Instant has more flavor, if i wanted a cup of hot water with minimal flavor I would Drink tea

[Charlene]

I have one thing to say to Dunkin' Donuts.....Ahem.....BAHHAHAHAHAHAHAHAHAHA
HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA! AS IF!

[MikeM]

Starbucks beans are made by Muslims...
Dunkin Donuts are made by Catholics..

Period

I went to Cali, Colombia in May to visit my wifes parents. The only franchised coffee shop I saw there was Dunkin Donuts. Nestled under the mountain of Tres Cruces (Three Crosses). That is because DD coffee is from Colombia. A catholic/cristian country.

Starbucks...from Arabia! From Etheopia...Muslims!

To me, I would sacrifice anything not to support a Muslims/Terrorist country!

[Detroit Barista]

Mikem, you are a delight.

As someone who has been apprehensive about going to work because in the eyes of her primarily Muslim customer base, she has committed the double sin of a) working for a corporation with a Jewish CEO that is "undoubtedly" funding the IDF and b) being Jewish, I find your comment hysterical. People have protested in front of our store and others because of some stupid rumor that we support Israel. But maybe those stories are only published in newspapers too high-falutin' for your tastes.

Disclaimer: I'm not suggesting that all Muslims are terrorist, or violent, or anything of the sort...but threats of physical violence are what they are.

[Indifferent]

I can't believe people talk about donuts and coffee on a website and then talk about the ignorant other person...hilarious. Thank God you are not spending your time on something that ACTUALLY matters. People who buy starbucks coffee also buy a purse that has LV all over it. Because they hope they will become a part of something ELITE. (BS for more expensive and no real life impacting difference.)

[Mike]

I work near Microsoft HQ in Redmond, WA (20 miles east of Seattle) and it is a diverse town that is primarily white, Muslim, Hindu, and Jewish.

I think it's horrible to say that Starbucks supports terrorism! Starbucks supports peace and good-times. In Israel, there are absolutely NO STARBUCKS so they most likely don't support Israel, and they buy beans from all over the world.

Starbucks DOES buy beans from Ethiopia which is a diverse country with it being mostly Christian, then Muslim, and then Jewish. Ethiopia provides the best and flavourful coffee beans on the planet, a rich culture, and a large impact upon modern religious life.

At one point in time, the King Solomon of Israel was given monetary gifts and offered sexual gratification from the Queen of Sheba (modern Ethiopia/Yemen). It also helped save the lives of Islamic men sent by Muhammad to escape persecution in Mecca.

When you say Colombia is a Christian country and Middle Eastern/African countries arn't, do some research. You'd be suprised.

And, wow, I'm a geek. I'm not being bias towards Dunkin' Donuts because I'm from Seattle. I just like Starbucks.... and how many people can say they got lost in SBUX HQ. Psshaw!

Shalom, Salaam, PEACE OUT!

[Robber Baron]

A pretentious faux coffe snob, as opposed to a knowledgable coffee gormand, or an employee of SBUX, might believe that SBUX has better coffee. Dunkin' Donuts actually uses higher quality beans than most SBX blends, and properly roasts them. SBX overroasts for the resultant assault on your taste buds. It is a LESS refined roast, NOT a more refined one.

In any event, personal preference surely is paramount and people should be free to choose what they desire. However, to believe that something is premium because it costs more is to prove to Howard S. that you are indeed the mindless sheeple that he took you for when setting his prices.

[Krispy Kreme Coffee]

Charbucks Sucks! And always will. Period.

I wonder how many Starbucks coffee drinkers are aware of two interesting facts.

A) They burn their beans

B) The coffee they are selling you at $4.00 a cup is actually a mid-grade and low-grade blend that they purchased at less than a $1.00 a pound.

Starbucks coffee is really no better than Maxwell House or Folgers. They just do a better job marketing it. If you want to spend money on a truly great cup of coffee, look for a single origin blend, shade-grown at over 1200 feet.

[Starbucks]

Hey, I just want you all to know that I'm a 14 year old kid, aight? And I love Starbucks, I've been drinking it since I was three, yep, three. I am known as "Starbucks," there isn't a person who I know who'd rather call me by my real name, rather than Starbucks. About the coffee determining factor... come on DD, do you really think you are going to keep the market with weak, machine processed coffee? And the doughnut factor, puh-leeze. That just like a bribe and we all know that bribery can be treacherous. Starbucks coffee taste better, has more robust, and you get a hell of a lot more for your money. Most Starbucks are even coffee houses and cafes, compared to DD's "modern fast food." Pshhh.

[justwantdecentcoffee]

What all you folks are missing is that Dunkin Donuts coffee just sucks. a few years back they cut back on the amount of coffee used to brew their alleged coffee. the stuff is now brown dishwater. Starbucks is also cutting the amount of coffee used in some of their stores where they have gone to automated machines (heard this from a barista who didn't do it). Peets kicks all their asses.

[islandbarista]

i work in a jiggy atmosphere? i think not! but i do like donuts!

[Sarah]

all y'all DD fans need to shove it cause Starbucks is God compared to your Satan. its just a proven fact that DD fans are bred white trash and are laced with redneck dna and cant spell, talk, do basic match, read, or write. They just dont like starbucks because they cant pronounce the word 'venti' or 'machiatto'. so quit hating and go roll in pig shit. oh, Dunkin Donuts sponsorsing nascar which adds to their white trash appeal..they might as well start sponsoring walmart, WWF, and hoe downs. Meanwhile Starbucks sponsors Polo or Cricket, Macys or Saxs 5th ave, and fine dining establishments! Starbucks is in just a whole different class to compare it with Dunkin Donuts is a insult!

[Mark]

FYI. Calling someone a white trash redneck who can't spell, talk or do basic math doesn't do much good when you fail to do the same. Seriously, if you are going to try and pretend you are as upper class as your beloved Starbucks, at least learn how to spell Macy's and Saks. And for the love of God don't start off a post with y'all and then call someone a redneck. Use the money you save at Dunkin' Donuts and get some speech and grammar lessons.