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Espresso drinks drive Dunkin’ sales

But traffic was down despite national value, and the company's stock price fell.
Photograph courtesy of Dunkin'

Dunkin’s decision to improve its lineup of espresso-based beverages is paying off.

The Canton, Mass.-based doughnut and coffee chain said Thursday that its U.S. same-store sales rose 1.7% in the second quarter ended June 29, driven in part by a 40% increase in sales of espresso-based beverages.

That was a modest slowdown from the first quarter, when same-store sales rose 2.4%. And the company acknowledged that traffic in the period declined as sales came largely from customers ordering more premium items, as well as higher prices.

Parent company Dunkin’ Brands’ stock declined 3% in morning trading Thursday.

David Hoffmann, Dunkin Brands’ CEO, said that the company’s two-year same-store sales were its best since 2016. “These results clearly reflect that Blueprint for Growth, our long-term strategy to modernize the brand, is working,” Hoffmann said on the company’s second quarter earnings call Thursday.

The espresso drinks were a primary driver. They now represent about 10% of the chain’s product mix.

Dunkin’ announced a revamping of its espresso platform late last year, declaring it to be one of the most significant product initiatives in the company’s history.

“We believe there was a significant market for quality espresso at an affordable price, of course delivered at the speed of Dunkin’,” Hoffmann said. He said the company in April expanded the program to include lattes.

He said the company is getting customers to trade up from coffee drinks to the espresso beverages, as well as attracting new customers. “This is our fastest-growing category,” Hoffmann said.

The company also has high hopes for some higher-end food products. It added an Egg White Bowl to its Power Platform in April, joining the Power Breakfast Sandwich it introduced in January.

It also has high hopes for its plant-based breakfast sandwich announced last month. Hoffmann said that the product is “priced in line with our other breakfast sandwiches.” The chain plans to make the sandwich available nationwide “in the future.”

Value also drove sales; the chain’s new Go2 value menu features sandwiches sold two at a time for $2, $4 or $5. Same-store sales of the company’s breakfast sandwiches are up 15% over two years, and three-quarters of the value orders include a beverage.

The company also plans to expand delivery through Grubhub, currently available in New York, to additional major U.S. markets by the end of the year.

Dunkin’ also has hopes for improvements in its mobile payment and loyalty strategies. The company in April started testing a plan to enable loyalty customers to earn points regardless of how they pay—a strategy that, in tests at 1,000 of its more than 8,000 locations, has thus far helped drive additional enrollments in the program.

Loyalty represents about 13% of sales, but the company’s “multitender” strategy could help improve that figure. “We believe we can grow that number in a meaningful way by expanding the membership funnel and driving incremental sales through one-to-one marketing,” Hoffmann said.

Dunkin’ plans to roll that plan out nationally later this year.

The company also plans to improve its mobile order function to enable nonmembers to use the app to pay to make orders. And it improved its on-the-go ordering process, including one-step enrollment that added 1 million customers to the chain’s loyalty program in the second quarter.

That program now has 11.7 million members.

Same-store sales declined 1.4% at Baskin-Robbins in the U.S. Revenues increased 2.5% to $359.3 million. Net income declined 1.4% to $59.6 million, or 72 cents per share. When adjusted to factor out one-time costs, net income rose 11.7% to $72.4 million.

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