Morgan told the Charlotte Business Journal:
But we do need to leverage our coffee. We’ve got great coffee. We need to get out there on social media and encourage those customers already coming for doughnuts to pick up a beverage. That’s one of our biggest opportunities. I’ll be disappointed if I’m standing at a drive-through a year from now and see people picking up a dozen doughnuts and already have their chosen coffee in their cup-holder. I want people to realize they’re coming to Krispy Kreme to get their doughnuts, but they’ve got great coffee or great chillers. If we could get to 80% doughnuts and 20% coffee that would be game-changing for us in terms of profitability.
And that is good news for investors!
Following the leader
The truth is that Dunkin Brands Group Inc (NASDAQ:DNKN) wants to be more like Starbucks Corporation (NASDAQ:SBUX). Dunkin’ Brands (NASDAQ:DNKN) has put a huge emphasis on its coffee in recent years, hoping to draw in more customers after that initial morning rush. Dunkin’ only makes about 40% of its sales after 11 a.m.; Starbucks makes about 50%.
Dunkin’ also wants to double its number of stores to 15,000, and has begun to revamp its franchises. The stores are becoming more relaxing with a more Starbucks-like feel inside with warmer colors, flat screen televisions, and music. Dunkin’ has also started to add more items to the menu besides donuts that are more lunch or early dinner fare, such as chicken sandwiches and iced tea.
Dunkin’ will have to work hard to keep up with Starbucks though. Starbucks Corporation (NASDAQ:SBUX) had budgeted more than $900 million to refurbish existing stores and build new ones. The company plans to renovate close to 1,400 of its 11,000 U.S. locations in FY 2013.
Starbucks continues to take over the world by addicting its inhabitants to coffee with plans to have more than 20,000 retail stores on six continents by 2014. The chain saw same-store sales rise 2.9% in April compared to a 0.3% decline in February and a 1.3% increase in March. Fiscal 2013 same-store sales are expected to be up 6% in the Americas.
Dunkin’ does well to chase both dreams of coffee retailer and donut shop. Both industries are doing well. Sales at U.S. coffee shops increased 8% last year, according to researcher Technomic. And in the 52 weeks ending June 30, 2012, donuts contributed 7.4% of total bakery dollar sales across the U.S., steady from the previous year, according to ModernBaking.com (sales reported are for all bakery outlets, not just Krispy Kreme or Dunkin’ Donuts).
Conclusion
There’s no saying which donut America loves more — Dunkin’ or Krispy Kreme Doughnuts (NYSE:KKD). But one thing is for sure, Americans love donuts, and they love coffee. And as long as that doesn’t change (and why would it?), both companies are great investments for the future.
The article Which Donut Is More Popular- Krispy Kreme or Dunkin’ Donuts? originally appeared on Fool.com and is written by Erin McBride.
Erin McBride has no position in any stocks mentioned. The Motley Fool recommends Starbucks. The Motley Fool owns shares of Starbucks. Erin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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