Dunkin’ Brands Group Inc. will introduce a new blended drink platform and mobile innovations in an attempt to perk up sales in 2015, the company said Thursday.
Packaged coffee competition and continued macroeconomic headwinds resulted in mixed 2014 results for the Canton, Mass.-based parent to the fully franchised Dunkin’ Donuts and Baskin-Robbins brands. Dunkin’ Donuts U.S. same-store sales rose 1.4 percent during the fourth quarter ended Dec. 27, and increased 9.3 percent at Baskin-Robbins.
International results were more modest, with Dunkin’ Donuts same-store sales rising 0.3 percent and Baskin-Robbins results falling 2.2 percent during the quarter.
Dunkin’ Donuts’ U.S. same-store sales would have topped 2 percent if not for lagging sales of the brand’s K-Cups and packaged coffees, as well as an economic environment that has left some still struggling, Dunkin’ Brands’ CEO Nigel Travis said.
While the economy is improving and gas prices are falling, pressure remains on the lower- and middle-income consumers, he said.
“If you look at growth in the economy, it’s all at the top end, people like yourselves,” Travis said in an earnings call Thursday with analysts. “We feel any stimulus that will help the middle- and lower-income consumer will be good for Dunkin’ Brands.”
Travis was optimistic that a new blended-drink platform will give Dunkin’ Donuts a boost this year. The new platform was introduced in some locations in the Northeast this month, and will expand gradually to the chain’s U.S. system by early summer, he said.
The platform includes new smoothies made with real fruit and yogurt, frozen Dunkaccino drinks, and Coolatta Lite options with 30 percent to 80 percent fewer calories than regular Coolattas.
Travis said the items are part of an ongoing plan to improve quality, increase the use of fruits and vegetables where appropriate, and reduce salt and sugar on the menu.
The company will also expand other menu platforms, like its Dark Roast coffee, variations of Croissant Donuts and steak sandwiches, he added.
January marked the one-year anniversary of Dunkin’ Donuts’ DDPerks loyalty program, which reached its goal of 2.5 million members. More than 11 million users have downloaded the brand’s app, which exceeded company expectations.
The program has given Dunkin’ Brands data that has allowed for more targeted marketing.
“Today, we have more robust data on guest transactions than we ever had in the past, and we’re using it to change guest behavior,” said Scott Hudler, Dunkin’ Brands’ vice president of global consumer engagement.
The result is that the most loyal guests are coming to Dunkin’ Donuts more often and spending more money, he said.
Looking at fourth-quarter data, consumers in a DDPerks control group spent more than 40 percent more on average than they did a year ago, and their average weekly visits increased more than 30 percent, Hudler said.
For fiscal 2014, DDPerks is estimated to have grown transactions by about 3 percent on average, he said.
That benefit grew during the course of the year, he noted. By the fourth quarter, the loyalty program contributed about 4 percent of transactions.
The next step will be adding mobile ordering, which Dunkin’ Brands is currently testing. Travis said the feature will help speed throughput and boost the chain’s convenience factor — an increasingly important aspect as convenience stores step up their competitive game.
Baskin-Robbins has also benefited from technology with growth in online cake sales. About 5 percent of ice cream cake sales are now made online, Travis said.
Dunkin’ Brands’ net income rose nearly 25 percent during the fourth quarter, to $52.5 million, or 50 cents per share, compared with $42.1 million, or 39 cents per share a year ago.
Consolidated revenue increased 5.5 percent, to $193.2 million, for the quarter.
For the year, same-store sales increased 1.6 percent at U.S. Dunkin’ Donuts locations and 4.7 percent at domestic Baskin-Robbins units.
Same-store sales declined 2 percent for the year at Dunkin’ Donuts’ international locations, while same-store sales fell 1.2 percent at Baskin-Robbins units outside the U.S. The company said it faces continuing challenges in Japan, where units are operated by a joint venture.
For the fiscal year, net income rose 20 percent, to $176.4 million, or $1.65 per share, compared with $146.9 million, or $1.36 per share the previous year.
Revenue for the year was $748.7 million, compared with $713.8 million in fiscal 2013.
The company added a net 704 franchised locations in 2014, including 405 Dunkin’ Donuts units in the U.S., where the brand is expanding to the West.
Dunkin’ Brands franchises more than 11,300 Dunkin’ Donuts locations and 7,500 Baskin-Robbins units worldwide.
Contact Lisa Jennings at [email protected].
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