Dunkin' Arming Itself With Espresso to Take Aim at Starbucks

CANTON, Mass. — In a strategy to draw in coveted Starbucks customers, Dunkin' Donuts is arming itself by aggressively featuring espresso drinks like lattes and macchiatos.

Dunkin' Donuts CEO Nigel Travis told CBS News that espresso drinks have traditionally accounted for a "fairly small" mix of the doughnut chain's beverage sales, especially when compared to Starbucks. However, Travis said Dunkin' Donuts started to change that with the introduction of its macchiato last year. "We're starting to move the needle," he told the news outlet.

According to Travis, espresso drinks pull in more money than regular drip coffee. They also help attract younger customers who tend to come in groups and get food to accompany their beverage. He did note, however, that many people don't know that Dunkin' Donuts offers lattes.

As a result, Dunkin' Donuts revamped its menu board in late February to emphasize its offerings like smoothies, lattes and Coolattas to better highlight its lineup of drinks. The previous menu board was dominated by combo deals and left little room to feature beverages, the executive said. The response to the menu board revamp has been "overwhelmingly positive," according to Travis. 

Sixty percent of the chain's sales are from its beverages, but Dunkin' Donuts wants to push that figure higher because beverages represent the most profitable category on its menu, followed by sandwiches and bakery items like doughnuts.

Dunkin' Donuts also faces competition from fast-food chains like McDonald's, which introduced an all-day breakfast menu last year, and convenience stores that are pushing more fresh food and drinks.

For the first three months of the year, U.S. sales rose 2 percent at established Dunkin' Donuts locations, boosted in part by the stronger beverage sales, CBS News reported.

Last week, Starbucks reported sales rose 7 percent at its established U.S. locations. The Seattle-based coffee chain said it has benefited from its popular mobile app and loyalty program, as well as stronger sales from items like breakfast sandwiches. Food accounted for more than 20 percent of its U.S. sales for the first time.

In yet another attempt to pull in Starbucks customers, Dunkin' Donuts announced it will introduce an order-ahead option on its mobile app in the New York metro area. Starbucks already offers a similar option nationally.

This month, Dunkin' Donuts also plans to launch a deal offering a Coolatta drink for $1.99. This will mark the chain's first national value deal in years, the news outlet noted.

Canton-based Dunkin' Brands Group Inc. has more than 11,700 restaurants in 43 countries worldwide.