Dunkin’ is trying to win over customers by serving better hot coffee.
The company, which has been trying to rebrand itself as a higher-end coffee shop, is investing about $60 million in new brewing equipment for all of its cafes.
The new smart brewers are designed to improve coffee quality and consistency, offer more variety and reduce waste. They should also be easier for employees to use.
A few years ago, Dunkin’ dropped the “Donuts” from its name to signal its focus on beverages. Soon after, it announced the installation of better espresso equipment, an improved espresso recipe and a new espresso cup, plus training and espresso certification for employees. In 2019, the brand added iced coffee taps to cafes. Upgrading its hot coffee brewers is the next step.
Taken together, the improvements should help Dunkin (DNKN)’ lure in more customers, said CEO Dave Hoffman during an analyst call discussing the company’s fourth-quarter results. Lately, fewer customers have been shopping at fast food chains, though customers often spend more per order than in previous years.
“We’re maniacally focused on traffic,” Hoffman said. The efforts are beginning to work, he added, noting that customer traffic is starting to improve, though it was still negative in 2019.
Sales at US Dunkin’ stores open at least a year ticked up 2.8% in the fourth quarter, the best improvement in six years, and a more modest 2.1% for the year. Espresso sales jumped nearly 40% year-over-year.
In addition to improving coffee, Dunkin’ is trying to bring in customers with value deals, trendy food items and better service in stores.
Last year, Dunkin’ started serving breakfast sandwiches made with meatless Beyond Meat (BYND) sausages. In the spring, it plans to launch oat milk lattes nationally.
Hoffman said some customers paired the sandwiches with premium iced coffees and espressos, resulting in a higher total check.
“It is important to give our consumers on-trend choices,” he explained, adding that buzzy menu items are a “key tenet” of the company’s marketing strategy this year. Dunkin’ has been pushing value meals to entice more budget-conscious customers, as well.
It’s especially important for Dunkin’ to step up its game now as the broader industry makes moves in the breakfast segment.
Wendy’s (WEN) is launching a national breakfast menu next month, including nine sandwiches, new side dishes, like potato wedges, and a new coffee blend.
And McDonald’s (MCD) plans to fight the breakfast wars with new menu items, deals and improved service. It recently announced the addition of two of its chicken breakfast sandwiches to national menus for a limited time. “We have to win at breakfast,” McDonald’s (MCD) CEO Chris Kempczinski said during a January analyst call discussing 2019 financial results.
“It’s highly competitive out there, and we’re fighting every day,” Hoffman said.