Dunkin’ Donuts is stepping up its battle plans in the breakfast wars against McDonald’s and Starbucks.
Amid falling sales and increased competition, the donut and coffee chain is revamping its counter and drive-thru menus at its 8,400 U.S. restaurants to emphasize its signature coffee and “all day breakfast” options. Dunkin’ is also dropping combo meals.
On Feb. 4, Dunkin’ reported its domestic same-store sales fell 0.8 percent last quarter, the first drop since the company went public in 2011. The chain also said customer traffic declined in the period.
On a phone call with investors, CEO Nigel Travis cited “revitalized burger players” as one of the chain’s key stumbling blocks. One of the leading players Travis was referring to is McDonald’s, which recently began offering breakfast all day.
The Golden Arches has benefitted tremendously from this change, with the chain reporting sales growth of 5.7 percent in its most recent quarter at U.S. stores open at least 13 months. The quarterly results were McDonald’s best in almost four years and blew past analysts’ expectations of 2.7 percent growth.
According to Bonnie Riggs, a restaurant industry analyst at NPD Group, the modified menu has the potential to turn things around for the embattled donut chain by reminding customers that it served egg sandwiches all day long before McDonald’s decided to do so. It’s also a way to emphasize the wide variety of beverages that Dunkin’ Donuts offers.
Breakfast remains a rapidly growing market at fast food chains, and Dunkin’ Donuts will most likely benefit by advertising more of its vast offerings, Riggs says. Once all of the chatter around McDonald’s all-day breakfast dies down, Riggs says, “the change may have less impact….”
But even though the breakfast market is growing, thanks to a stronger economy and low unemployment, that doesn’t necessarily guarantee success for Dunkin’ Donuts, Riggs says. “Is the market getting crowded? Yes. Will everyone win? No. If you have a competitive point of difference that can address customer needs, those will win.”
Dunkin’ Donuts might also have been inadvertently helped by the news last week that Starbucks was tweaking its rewards program. Instead of customers being awarded points based on how often they visit a store, they will earn rewards based on how much they spend. The news created a firestorm of criticism from people who purchase the cheaper items on the menu.
Riggs says that by Starbucks heightening awareness of its rewards program, “it will also make customers of other stores aware of what loyalty program their store offers.” Dunkin’ Donuts could benefit from the free advertising, and its own rewards program could get a bump of popularity.
The new menu from Dunkin’ Donuts is just the latest salvo in the breakfast wars, where the ammo is caffeine, syrup and sausage. McDonald’s might have won the last battle, but this war is far from over.