Dunkin' says won't compete with Starbucks

Jubilant to position it as food brand rather than coffee player

Dunkin’ Donuts will not compete head-on in India with Starbucks, its closest rival back in their native America. Jubilant Foodworks, the master franchisee for Dunkin’ in India, has tweaked the business model of the company based in the northeastern US state of Massachusetts, opting to position it more as a food service brand than a coffee player. Dunkin’ stores will roll out in the first quarter of the 2012-13 financial year, beginning with Delhi, followed by Bangalore and Mumbai.

Jubilant Foodworks chief executive officer Ajay Kaul said on Wednesday there was potential in the untapped “full-day, part-food segment”. That refers to meals offered through the day from 9 am to 11 pm. Players here are mostly food service brands such as McDonald’s, KFC, Pizza Hut, Nirula’s and Domino’s.

The final touches were being put to the menu and service offering of Canton-headquartered Dunkin’. The details would be disclosed at a later stage, Kaul, who is also the master franchisee for Domino’s Pizza in India, Bangladesh, Nepal and Sri Lanka, said in a conference call.

The company, with 439 stores of Domino’s in India, has plans to launch 80 to 100 stores of Dunkin’ in the next five years and 500 stores in 15 years. Given that Noida-based Jubilant will now have two food service brands to manage, its capital investment for the next financial year is likely to cross Rs 100 crore, Kaul said.

The first phase of the Dunkin’ launch will see 1995-incorporated Jubilant open up outlets in mainly metro cities, moving subsequently to Tier-II and Tier-III towns. It is also on its way to commissioning a new factory at Noida in the National Capital Region. That is meant to manufacture food and beverage products for Dunkin’ stores.

The firm, which closed the third quarter of the 2011-12 financial year with sales of Rs 277 crore, will eventually set up additional factories as the Dunkin’ store count goes up, Kaul said.

Experts believe Jubilant is “clever” to position 1950-founded Dunkin’ as a food service brand rather than a coffee player, given the intense competition that the country’s close to Rs 1,000-crore coffee-chain market is expected to see this year. Almost all existing players, including Cafe Coffee Day, Lavazza and Costa Coffee as well as new ones such as Seattle-based Starbucks, will rapidly scale up to tap the growth potential of the market. Whilst the coffee chain market in India is growing at clip of about 30 per cent per annum, it comprises only 12 per cent of the country’s Rs 7,500-crore organised food services retail market. The fast food/quick service restaurant segment, where Dunkin’ will sit, is the largest within the organised food services retail market at 47 per cent.

Kaul hints as much about the market size for his firm’s decision to position Dunkin’ less as a coffee player and more as food service brand. “While the entry of new players is a welcome move in the coffee segment, it is not a very large category,” he says. “The entry of new players will spur market development.” Much like 1971-opened Starbucks, which has rapidly been expanding its footprint outside of the US, Dunkin’ has over 2,900 stores in 30 countries today. If outlets of the US are taken into account, then Dunkin’ overall store count is nearly 10,000.