Case 7 Dunkin' Donuts-Growth Feeds a Sweet Tooth The java giant is opening hundreds of stores and entering new markets appealing to a new generation of customers, But can Dunkin' Donuts stay on course with its rapid growth? Donuts with Passports Dunkin' Donuts's present global travels are a long step from its first coffee shops opened in the Boston, Massachusetts, area in 1950. Now it's an internal tion for quality that has earned the trust of many loyal customers. Company executives will keep worldwide "Runnin' on Dunkin' " Part of Dunkin' Donuts sing on its core products-coffee and donuts With 500 billion cups cons opular global beverage, and estimates are that Americans drink 400 million cups a day. Dunkin' Donuts serves close to 3 million of them. That equates to about 30 cups per second and 65% of the company's anrus Target on Emerging Markets Most Americans have experi one of its almost 11,000 outlets. The Dunkin' brand has carved out an internation arkets such as Canada and Brazil, but also in some unexpected ones such as India, Brazil, Qatar, So The company is betting big on e merging markets are attractive because they are growing very quickly, they've a fast growing mid out more), and the nds," says CEO Nigel Travis The company's growth plans include ing the try's total number of Dunkin' Donuts stores to 500 wit cate in Asia a 'disproportionate' number of the 350-450 outlets that it plans to open avis said. There are now more than 10,850 Dunkin' Donuts retail location ding in excess of 7,650 in the United States alone, and they are operating in more than 3,150 locations in other countries. As of the end of January 2017, all Dunkin' Donuts locations were owned and operated by franchisees. New Products For most of its existence, Dunkin' Donuts' main product focus has been donuts and coffee for dunking them. Since Stan Frankenthaler became executive chef and vice president, Dunkin' has launched about 25 new products annually as part of a new product innovation initiative. It has stepped up by offering a variety of espresso-based drinks and sugar-free flavorings, including caramel, vanilla, and mocha swirl. Dunkin's strategy now includes breakfast sandwich combinations of eggs, cheese, ham, and sausage on Texas toast, as well as English muffins, croissants, bagel sandwiches, and burritos. If plans prove successful, more customers than ever may flock to the shops. However, it may take a while t vince them that Dunkin' Donuts is the place to go to for a big breakfast. Customer Appeal Sometimes called the "anti-Starbucks," Dunkin' Donuts has a rich history of offering simple and straightforward morning snacks-earnest and without pretense-to the everyday working class. The company appeals to modest, cost-conscious customers Not content to be merely an econom for customers, the donut icon is also moving toward a more environmentally friendly and health-conscious approach. Dunkin' Donuts recently announced that it would eliminate synthetic colors from its food and bev age offerings by the end of 2018. Dunkin' Brands Chairman and CEO Nigel Travis says, "we are committed to meet the evolving needs of our customers, including their preference for more nutritional transparency and simpler ingredients, while maintaining the great taste and the fun, vibrant colors expected from Dunkin' Donuts and Baskin-Robbins products." Selective Partnerships Dunkin' Donuts is banking on strategic partnerships to help fuel growth. But "selectivity" rules the partnership decisions. Although it often partners with grocery retailers to create a store-within-a-store concept, the company is very choosy about where it sets up shop. "We want to be situated in supermarkets that provide a superior overall customer experience," says a Dunkin' business developer. "Of course, we also want to ensure that the supermarket is large enough to allow us to provide the full expression of our bra . . which includes hot and iced coffee, our line of high- quality espresso beverages, donuts, bagels, muffins, and even our breakfast sandwiches." Furthermore, the outlet's location within the supermarket is critical for a successful relationship. "We want to be accessible and visible to customers, because we feel that gives us the best chance to increase incremental traffic and help the supermarket to enhance their overall performance." Finding the Sweet Spot If Dunkin' Donuts can find the "sweet spot" by being within most consumers' reach without creating the feel of a mass retail-like presence, the company's growth strategy may be successful. But this strategy has risks. Offering too many original products in too many locations could dilute essential brand appeal and alienate longtime customers who respect its history of simplicity. Potential new cu hers and a younger demographic might view Dunkin' Donuts as an uncool "yesterday's brand." Then, too, some older franchises seem long overdue for a makeover, especially when compared to the trendy Italian feel of a nearby Starbucks cafe. In a move aimed directly at a core Starbucks market, Dunkin' Brands recently reported that it is partnering with Coca-cola to launch a complete line of chilled coffee beverages in its U.S. markets in 2017. Starbucks currently has an 80% share of this lucrative category, and the move into the $1.5-billion, ready-to-drink coffee market is Dunkin' Donuts's attempt to crack this space. The donut company's iced coffees will be distributed in grocery stores by Coca-cola. Case Analysis Questions 1. DISCUSSION What does Porter's Five Forces analysis suggest about the attractiveness of competing in the same industry as Starbucks? What are the strategic implications for Dunkin' Donuts? 2. PROBLEM SOLVING Complete an up-to-date SWOT analysis for Dunkin' Donuts. If you were the CEO of the firm, what would you consider to be the strategic management implications of this SWOT analysis, and why