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Developing Sustainability at Dunkin Donuts

Info: 1656 words (7 pages) Essay
Published: 15th Mar 2021 in Business

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A Sustainable Dunkin Donuts

 In order to be able to maintain a future, Dunkin Donuts must understand, study and apply microeconomics data specifically what involves their products and services. The company’s history is also included as well as current supply and demand conditions, pricing, cost of production, and the overall market conditions. A full review of the company’s history provides a strategy for the future to continue to analyze the overall market. Making research regarding the current supply and demand for DD's products provides foundational considerations for future pricing decisions. Analysis of the current cost of production, and factors that affect the cost to the company. Such as research, labor, materials, develop, and commercial real estate. It creates an effective tool to use in conjunction with the price analysis to project futures revenue. In using future revenue projection DD in creating a clear vision for overall company and growth. The data say DD announced better than expected revenues and earnings, clearly things are going well for the coffee and donuts maker. DD is currently dominating Starbucks, happiness levels for DD are now higher than they are for Starbucks. Starbucks at 25 times as much revenue as Dunkin’s, even a small shift of coffee-seeking regulars could have an enormous positive impacting on DD bottom line. Special attention has been given to the opening of DD outlets at strategically important Location to generate the maximum number of customers. Keeping consumers ethics and beliefs in mind while analyzing the supply, demand, pricing, and cost to the company, DD will create a clear vision for sustainable growth and innovation that aligns with the company’s founding principle.

     Dunkin company history

Dunkin Donuts opened its first store in Quincy, Massachusetts in 1950. When founder William Rosenberg opened his first donuts shop in Quincy mass in 1948 it was originally name “Open Kettle”. Two years later DD was officially born. ‘DD expand in business with the goal to make and serve the freshest, most delicious coffee and donuts quickly merchandised stores. In 1955 the first Dunkin Donuts franchise opened, since then the brand has grown to more than 12,400 restaurants in 46 counties around the world, with standard for coffee excellence that are among the best in the industry.  The chain was acquired by Baskin- Robins’ holding company Allied Domecq in 1990; its acquisition of the Mister Donut chain and the conversion of that chain to DD facilitated the band’s growth in North America that year. DD and Baskin Robbins have been subsidiaries of Dunkin Brands, headquartered in Canton, Massachusetts, Since 2004. The chain began re branding as a “beverage-led company”, and was renamed Dunkin’, in January 2019.

    Dunkin Donuts Good and services

DD offers a full line up of espresso beverages, including lattes, macchiato and cappuccino, a range of frozen beverages premium hot teas and iced tea, sandwiches and delicious baked goods. The band is constantly innovating to offer customers new delicious flavors and menu options to keep then running all throughout the day. Each storefront offers free Wi-Fi for all customers and free public restroom, some locating has driven thru services. They also offer a variety of snack and small meal options.DD is American’s favorite’s all-day, everyday stop for coffee and baked goods. The brand still uses the original property coffee blend recipe establish by its founder and services approximately.

   Supply and Demand Conditions

Dunkin Donuts is one of the most well-known and oldest coffee and Beverage etc. having a total revenue of $1.40 billion in 2019 (Statista). In 2018 63% of Dunkin’s demand is coffee and cold beverage (New York 2018) Data blew show the coffee consumption is growing every year in the USA.  So that means that the products DD is offering will continue to increase. The growing numbers of daily coffee and beverage drinkers supplements the growing demand (Statista,2019)

Dunkin is a market leader in their products, it has earned a number 1 ranking for customer loyalty by Brand Keys for 13 years running. It has been America’s favorite for almost 70 years. They sever more than 3 million customers each day and every day. When Starbucks only serves 500 thousand per day. This tells us it has a constant demand in the future.

 

 

 

 

Price Elasticity of Demand

Revenue will Increase because the price of glazed DD is elastic therefore decrease price will increase revenue. The demand for DD glazed doughnut will change by 30% and decrease price by .45. Their loyalty consumer was that made DD come with the logo “America Runs On Dunkin” (DNKN 2019). DD has a reward program called DD perks in which has more than 12 million members in it. It has many benefits. Chart in the bottom show how the members of DD perk has grown over the years.

Cost of Production

Dunkin Donuts cost of goods sold, and operating expense have continually increase leading to over $ 14 billion in cost of goods sold and over $ 90 billion in total operating expenses in 2018. Their calendar Starts in June 30 and ends the following year same month and day (Macrotrends, 2019). What’s most surprisingly is that in the last 3 years, since 2016 the companies operating expenses came from $867 million to $909 million (Macrotrends, 2019). DD's largest major factor total operating expenses is their payroll is nearly 270,000 employees with an average of $9.76 per hour (pay scale, 2 019). DD’s paid out between $3-$4.5 billion dollars in 2018 payroll. DD's favorite ingredients on coffee is Arabica beans followed by Enriched Unbleached Wheat flour to make America’s favorite donuts. DD uses nearly 74 million kilograms of coffee beans per year and 14 million kilograms of flour a year. More than 3million customers visit DD every day. According to (Ycharts2019), the cost of Arabica coffee beans as of September 2019 was $2.84 per kg and for Enriched Unbleached Wheat flour as of September 2019 was $0.90 per kg. These prices have dropped since September 2016 for the highest price the market has ever seen for the beans at $4.06 and flour at $5.08.

Overall Market

Dunkin Donuts is the longest and most famous coffee/donuts company from 1950 to present and quick service restaurant. It’s also the largest product of baked goods. Take- as- you-go beverages in the business world today. DD own 39.8% of the market (Statista,2016), DD's main competitor is Starbucks with a 38.3%with the remaining shares being split among others including International Dairy Queens. Dunkin Donuts and Starbucks comes to a staggering 78.1%, this market can be considered an oligopolistic market

When we refer to the barriers to entry in the coffee industry, they are relatively low to DD, that’s because of the low entry to the market profit margins will decrease within the industry in the long run. The startup costs for this type of industry are not constraining because the united cost over time will not decrease. In other words, it does not require a lot to start a coffee shop. There are certain concerns and factors that need to be considered when entering this type of market. First when entering as an entrepreneur your main concern might be if the business fails in the first 3 years. Another will be considering the post entry conditions and trying to complete with large companies like Dunkin Donuts. You will need to establish your consumer base and gain reliability of the quality of your product to be different from other competitors. Your initial costs must be sent on advertising in order to gain Market Share because “America Runs On Dunkin.” DD is a big company in this industry. Many small coffee shops will think it twice before entering the market. DD may feel the pressure from there other competitors knowing they were one of the first coffee shop in North America and it may be easy to persuade the costumers in buying a different brand. DD should keep on doing what they are doing up to know. Constantly evolving, reevaluating and assessing its product offering and prices in order to keep their success in the marketplace.

Recommendation

Dunkin Donuts should continue the product promotion strategy, taking advantage of holidays and events to offer coupons. By doing so the brand maintains a high sustainable price and reduce cost, while still offering their customers chances to redeem some value for their purchases. This is a strategy that gives the customers a chance to feel like they can redeem loyalty point if they ever feel the need to. At the sometimes they are giving the sell market influence as more customers are appealed to products that offer some form of promotion and more value for their money.

References:

  • Statista / us-coffee-imports-by-top-10-countries-of-origin
  • Forbes Dunkin-Donuts-us-to-push-revenue-growth-for-Dunkin-brands
  • Dunkin’ Brands Groups Inc. (n.d.). Retrieved January 24,2018
  • Team, T. (2015), December 16). Here’s how Dunkin’ Brand Plans To Drive Growth In The Future Retrieved January 24,2018

 

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