Dunkin’ Donuts will go after the mass end of the market even as arch rival Starbucks is expected to target the premium end.
The timing couldn’t have been more significant. A month after Starbucks announced its entry into India came the news that arch rival Dunkin’ Donuts was also stepping into the same terrain. While the rationale for their entry into India remains the same - to take part in the growth the market here presents - the consumers they will go after will vary.
Starbucks is expected to target the premium end of the market; and Dunkin’ Donuts, the masses.
Nigel Travis, chief executive officer, Dunkin’ Brands, and president, Dunkin’ Donuts, says, “Dunkin’ Donuts will be positioned as a value brand. The bulk of the consuming class here lies at the mass end of the market, and Dunkin’ Donuts will be compatible with that. It also offers huge scope for growth for us.”
Travis is clearly excited about Dunkin’s prospects in India. “There is a fit,” he says. “With what we can offer and the consumers we see here.”
Incidentally, Dunkin’s and Starbucks are positioned no different in their home turf of the US. The latter targeted at the upscale consumer; the former, at the working class. “It is not uncommon in the US to be drawing comparisons between Starbucks and Dunkin’ Donuts,” says Harish Bijoor, chief executive officer, Harish Bijoor Consults. “Starbucks’ is a sit-down format, while Dunkin’ Donuts is about grabbing a donut and coffee on the go,” he says.
In recent years, however, Dunkin’s has attempted to borrow elements from the Starbucks strategy. This includes providing food across day parts and having the finest coffee.
Ajay Kaul, chief executive officer, Jubilant FoodWorks, the master franchisee for Dunkin’s in India, says, “Dunkin’s today has emerged as the largest baked goods and coffee chain in the world. You think baked foods, and they have an assortment on offer. Their coffee is also very good.”
This change, say experts, has been necessitated as Dunkin’ has attempted to expand its footprint globally. At the moment, the baked goods and coffee chain has over 9,700 outlets in 31 countries. Starbucks is larger with a footprint in 50 countries. It has over 16,800 outlets. To widen the gap between itself and rivals, Starbucks recently announced that it was adding another 500 stores in 2011, 400 of which would be set up in emerging markets such as China.
Travis says his firm’s business in China is still small at the moment. “We have 100 stores in China currently. We began operations in Russia last year. We have stepped into India now. So yes, we are moving quickly, but the business is small. We realise that emerging markets offer tremendous scope for growth. And we would like to close the gap there,” he says.
Starbucks meanwhile is looking to cross the 1,000-mark in terms of outlets in China in the next few months.
In India, both brands are yet to take off so they are evenly poised at the moment. But the game of one-up-man-ship, say retail industry sources, is likely to be played out here too as both look to swiftly ramp-up once stores come on stream. While Dunkin’s appears to have got a slight edge at the moment by tying up with Jubilant, Starbucks, despite its tie-up with Tata Coffee, is exploring the option of tying with allied partners for stand-alone stores.
In an interview with an international newspaper during his visit to India last month, Starbucks’s chief executive officer, Howard Schultz had said that his firm would select an Indian partner for developing stand-alone stores without giving a time frame to it.
Starbucks’ memorandum of understanding with Tata Coffee will allow it to source and roast coffee beans from the latter’s Kodagu facility in Karnataka. It will also set-up stores in the Tata group’s associated retail stores and hotels.
But this is clearly not enough if it has to make a dent in the marketplace. According to Bijoor, India can absorb up to 5,400 cafes, while the current number across coffee chains is just above 1,300.
Home-grown players such as Cafe Coffee Day, the largest in the space at the moment, are ramping up fast. Café Coffee has 1,075 stores currently with plans to take it to 1,100 by the end of this fiscal. In three years, it hopes to take its store count to 2,000.
Both Dunkin’ Donuts and Starbucks then have much work to do. According to Kaul, the first Dunkin’ store will be opened in the first quarter of 2012. Some three to four stores will be opened in the first year itself. “Subsequently, we will ramp up the number to about 80-100 stores in five years. The target: take it to 500 stores in 15 years,” he says.
