Porter’s Five Forces Analysis of Dunkin Donuts
Key Facts
| Name | Dunkin’ Brands Group |
| Industry | Restaurants |
| Founded | 2005 |
| Headquarters | Sandy Springs, Georgia |
| CEOs | Paul Brown |
| Revenue | US $11.4 billion in 2022 (Dunkin’ Brand) |
| Profit | US $242.024 millionin 2019 |
| Competitors | Starbucks, Krispy Kreme, McDonald’s, Peet’s Coffee & Tea, Caribou Coffee, Au Bon Pain, Tim Horton’s and Einstein Bros. Bagels |
Company Overview
Dunkin Donuts headquarter is based in Sandy Springs, Georgia. It is associated with the Quick Service Restaurants (QSR) industry that offer variety of food options especially for breakfast. It offers wide range of ice cream, sandwiches, coffee, donuts, bagels and muffins. It is operational through franchise restaurants by the brand name of Dunkin’ Donuts and Baskin-Robbins. According to Forbes, currently the Baskin-Robbins restaurant brand offers to its customers hard-serve ice cream, soft serve ice cream, frozen yogurt, shakes, malts and floats. The Dunkin’ Donuts brand is offering coffee, donuts, muffins, bagels and breakfast sandwiches. In 1950, Bill Rosenberg opened the first Dunkin’ shop in Quincy, MA and five years later, a franchise legacy was born. Dunkin Brands Group was founded on November 22, 2005 and is headquartered in Canton, MA.In 2022, Dunkin’ Brands generated revenue of around 11.4 billion US dollars. Dunkin Donuts was acquired by Inspire Brands in December 2020, hence it no longer reports standalone financial results.
Porter’s Five Forces Analysis
Porter’s Five Forces Analysis is a widely used model to evaluate companies’ strategies in reference to its industry for neutralizing the competition and increase the margins, it is developed by Professor Micheal E. Porter in 1979, at Harvard Business School.
Dunkin Donuts Rivalry among Existing Competitor
- Dunkin Donuts Business Segments: The Company’s main business is operating in four business segments that includes Dunkin’ Donuts U.S., Dunkin’ Donuts International, Baskin-Robbins International and Baskin-Robbins U.S. Dunkin Donuts is a leading American brand for baked goods and coffee chain. It serves more than 3 million customers each day. Dunkin Donuts has more than 12,900 restaurants located in 42 countries. Dunkin’ is one of the largest coffee shop and donut shop chains that expandsglobally.
- Dunkin Donuts Global Operations Year 2021: It is a leading brand known for baked goods and coffee chain. It serves more than 3 million customers daily. Dunkin Donuts has more than fifty flavors of donuts and wide range of premium flavored beverages (coffee and shakes), bagels, breakfast sandwiches/croissants and other baked items.Dunkin Donuts food chain is offering 50 above flavors of donuts, dozens of beverages,bagels, breakfast sandwiches and other baked items. Dunkin Donuts has a tough market competition as its competitors are also somehow offering the same products making it easier for the consumers to have variety of food and drinks options. The main difference lies in the business operational scale like stores and branding methods. Dunkin’ Brands’ 2019 annual revenues were reported as $1.3 billion. In 2022 it generated sales revenue of worth US $11.4 billion.
- Starbucks: For 2022 revenue generated was $32.25B, a 10.98% increase from 2021.In 2021 Starbucks company made a revenue of $30.36 billion and in 2020 revenue was of $23.17 billion. Over 8,900 of Starbucks’ U.S.-based locations are company-operated, while the remaining are franchised. Over five decades, Starbucks Corp. has aggressively evolved into the world’s biggest coffee shop-themed company by roasting, marketing, and selling specialty coffee, drinks and food items. In 2022, they were available in over 34,300 outlets in 84 markets throughout the world. Under the product category, beverages are the most profitable and the major portion of income.
McDonald’s: McDonald’s financial statements 2022 stated company’s revenue as $23.26 billion.
In 2021, the company’s revenue was $23.22 billion, and $19.20 billion in 2020. Since its establishment, it has grown to around 38,000 locations worldwide, serving nearly 68 million people every day in 118 countries.That equates to around 1% of the global population who desire a burger, fries, or chicken nuggets as soon as possible.
- Tim Hortons: Tim Hortons is based in Toronto, Canada that sells coffee, doughnuts, and other fast-food products. Tim Hortons is Canada’s largest quick-service restaurant business and has 5,352 outlets in 15 countries.Tim Hortons, a Toronto-based quick service restaurant business, produced 2.25 billion US dollars in sales and 1.09 billion from franchises and properties for the fiscal year 2021. Tim Horton’s is the biggest restaurant chain in Canada in terms of gross sales in 2021.
Dunkin Donuts Threat of New Entrants
- Global Restaurant and café Industry
Restaurant Brands generated revenue for the twelve months ending September 30, 2022 of US $6.362B. The consumer mix globally is transitioning away from staple items and toward value-added, healthier alternatives.Furthermore, the rise of obesity, increase in global workforce and some government initiatives are encouraging the consumers to adopt healthy alternatives. For example, Saudi Arabia’s 50% tax on carbonated soft drinks and 100% tariff on energy drinks, will make healthy choices even more appealing to consumers. Dunkin Donuts has also launched the healthy low calorie alternatives however moderate threat for new entrants exists that can be reduced by making consistent efforts to cater customer tastes and preferences.
- High Capital Investment- Trained Human Resources
Human resources in the restaurant and food business have to assist customers throughout their employment period. Thus, it requires effective planning and training of employees to ensure that food and beverages quality standards are met consistently. The Brand Champ and LEAD training platform are training programs launched for professional and personal development of Dunkin’s employees. It is declared in Annual reports by Inspire that more than 400K employees participated in Brand Champ training program from 2014-2022.
- High Research & Development Cost: The retail sales of coffee in USA is worth $5.18 billion. Dunkin has been the major contributor to tea and coffee consumption. Dunkin contributed to the successful planting of 450,000 trees in coffee growing districts throughout Honduras and Guatemala under the One Tree program in 2021, including locations critical to regional environmental stability.
- Technological Advancement:
According to the Deloitte survey conducted in three months among 1,000 restaurant customers it was found that customers’ three top priorities are convenience, digitalization and safety. They concluded that due to mobile apps and online websites the consumers want digital interactions from restaurants, as well as cutting-edge technology that understands them and considers their preferences. It was found that 64% of the customers prefer to order the food digitally on premises at a restaurant.
Dunkin Donuts Bargaining Power of Suppliers
- Supplies Industry Influencer: Coffee consumption per capita in USA is 1.87 cups per day. Dunkin has created the market niche by extensively executing the quality standards for their supply of ingredients. Dunkin’ started Rainforest Alliance Certified Iced Green Tea in 2014, and has since upgraded to 100% Rainforest Alliance Certified Iced Green and Black Tea as declared in annual report 2022.
- Suppliers Collaboration: In 93% of franchise based food chains Dunkin introduced trainings for their supplier named ofi (formerly Olam Food Ingredients), a global agri-business company. The people who take coffee to wake up in USA is 58%.Dunkin’ planned, in the next three years to help 350 coffee farming families in Santa Barbara and Comayagua, Honduras, become familiar with high yield and better standards as stated in Inspire annual reports 2022.
Dunkin Donuts Bargaining Power of Buyers
- High Product Differentiation:Dunkin’ launched Avocado Toast in 2021, utilizing four simple ingredients: avocado, sea salt, black pepper, and lemon juice atop real baked Sourdough bread. Dunkin’ Donuts decided to roll out high-volume brewers for coffee in 2020. Consequently, with the advent of this technology, they can now offer variants other than Original Blend and Dark Roast.
- Customer Satisfaction – After Sales Services
According to Statista Customer satisfaction at Dunkin’s drive thru in the United States, in 2020, by service type resulted at 90% for overall experience. Friendliness of staff was rated at 89% and the quality of menus ordered was rated at 88% by the customers. Thus, 24/7 providing a seamless customer experience has enabled to gain the trust from buyers by Dunkin brand.
- Government Rules & Regulations: The government intervention to maintain environment sustainability, food and beverages quality standards helped the food chains to achieve the customer satisfaction and goodwill for their brands.
Dunkin Donuts Threat of Substitute Products or Services
- Baked Products and beverages: Dunkin’ Donuts collaborated with Planet Oat in 2020 to become the first national restaurant brand to serve oat milk in 100% of its U.S. locations. Also non-dairy alternatives include almond milk and coconut milk from Dunkin’ Donuts. In January 2022, Dunkin’ Donuts decided to release omelet bites, a remarkable twist on classic breakfast absolute favorites. In USA 47% of people between the age of 18-24 take coffee.
- Brand Loyalty: To ensure brand loyalty and transparency Inspire Brand (Dunkin Donuts) has collectively introduced new ingredients for menus by removing artificial colors. The nutritional breakdowns are given in menu and, the staff is trained about the nutritional values to ensure that brand is represented as fully aware and equipped to satisfy the consumer requirements. Statista reported 92% brand awareness in USA for Dunkin’.
- Post-COVID 19 Market: People are actively looking for convenience, and in an increasingly off-premises environment, that means drive-through, takeaway, and delivery are essential.
People’s dining habits are being transformed by developments such as remote work models and crowd avoidance. Digital technologies and automation for restaurant services are on the rise, but the present obstacle for innovation must be solved by implementing COVID-19 dine-in safety standards. Artificial intelligence is also being used to make the ordering and delivery ofmeals simpler. These recommendations were given by Deloitte for restaurants, after studying consumer behavior before and post COVID-19.
References
- Forbes, Profile, Dunkin’ Brands Group
- Statista (February 2020) Revenue of Dunkin’ Brands worldwide from 2007 to 2019(in million dollars)| Statista. Statista.Availableat.Statista
- Statista (September 2022) Dunkin’ Donuts brand awareness, usage, popularity, loyalty, and buzz among restaurant chain customers in the United States in 2022/Statista. Statista.Availableat.Statista.
- Statista (October 2020) Customer satisfaction at Dunkin’ drive thrus in the United States in 2020, by service type| Statista. Statista.Availableat Statista
- Opportunities in the GCC food landscape: Strategies for success, PWC network
- Dunkin’ Brand: About Us. Available at Dunkin’
- Inspire Brand: About Us. Available at Inspire
- How McDonald’s Makes Money, (July 12, 2022) Efficiently catering to the basic need to eat .Available at Investopedia
- How Starbucks Makes Money, (December 29, 2022) The North America region and beverages make up biggest share of revenue. Available at Investopedia
- Inspire Brand Year Good Citizens Annual Report 2022.Available at Inspire
- Starbucks vs. Dunkin’: What’s the Difference? (January 17, 2022). Available at Investopedia
- Deloitte Analysis: The restaurant of the future: A vision evolves. Available at Deloitte
- Yahoo Finance| Dunkin’ Brands is going private in an $8.8 billion deal by Arby’s owner— why it’s not a shock. Available at Yahoo Finance