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In the coffee battle, Starbucks has been the clear winner over Dunkin'

But both brands have seen same-store sales slowdowns in recent years, says RB’s The Bottom Line.
Photograph: Shutterstock

The Bottom Line

As my colleague Peter Romeo reported last month, the concept formerly known as Dunkin’ Donuts is revamping its espresso business, ostensibly to be more competitive with giant rival Starbucks.

It is only the latest in a series of efforts by Canton, Mass.-based Dunkin’ to step up its game, following a menu simplification effort and a new CEO in Dave Hoffmann and, of course, its decision to drop the “Donuts” from its name.

But the following graphic probably does more to explain why Dunkin’ has taken so many of these steps.

Starbucks-Dunkin’ Same-Store Sales Since 2010

Source: Technomic

Since it became a public company in 2010, Dunkin’ same-store sales have outperformed Starbucks only once: the second quarter of this year. But that quarter was more about the dramatic slowdown at Starbucks than it was a surge at Dunkin’.

From 2010 to 2015, Starbucks’ quarterly same-store sales averaged an incredible 7.5%. Since then, they’ve averaged a more pedestrian 3.4%.

Dunkin’s same-store sales slowed from 3.1% from 2010 to 2015 to 1% since the first quarter of 2016.

Even in the second quarter of this year, Starbucks still outperformed Dunkin’ on a two-year, stacked basis—6% for Starbucks versus 2.2% for Dunkin’.

Both brands, in fact, have clearly slowed in recent years. Dunkin’s slowdown simply preceded the one at Starbucks.

And Starbucks’ same-store sales are coming from stronger unit volumes.

Average Unit Volume

Source: Technomic

But same-store sales aren’t everything. Both chains have pushed unit growth in recent years. And many believe that the slowdown at Starbucks in recent years is due largely to its aggressive expansion.

That might be true. But it has actually been the more disciplined of the two chains. Look at this graphic:

U.S. Unit Count

Source: SEC data

Since 2010, Starbucks has grown its unit count by an astounding 31%, enabling it to surpass McDonald’s this year as the country’s second-most prolific restaurant chain with more than 14,000 locations.

But it also cut unit count that year as it came out of the recession, then stepped on the gas as its sales surged. Its recent same-store sales slowdown suggests that perhaps it should slow down again.

Dunkin’, on the other hand, has grown consistently in the years since and has grown units by more than 36% since 2010.

A lot of Dunkin’s recent growth has come in Western markets where its brand is less well-known and is not part of the morning ritual for many consumers—part of the reason the brand is dropping "Donuts" from its moniker.

But the company is entirely franchised and has less control over whether its operators add units.

One brand we don’t show is McDonald’s, the country’s largest chain by sales and every bit the rival to Dunkin’ that Starbucks is. But McDonald’s has actually lost breakfast share this year. So you can probably dismiss the idea that it is taking share away from the two coffee giants. Another Dunkin’ competitor, Tim Hortons, is also struggling in the U.S.

All of which suggests that perhaps the affliction bugging Starbucks is also bugging Dunkin’, McDonald’s and maybe even Tim Hortons.

Perhaps this means the coffee business is oversaturated. Or maybe consumers just aren’t out as much as they once were, making them less likely to grab a coffee or a Frappuccino or an espresso drink. Maybe prices are too high and those less loyal consumers are shifting spending to c-stores—something Dunkin’ in particular has dealt with in recent years.

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