Dunkin’ Donuts Says Espresso Gives It Shot Against Starbucks

With the addition of more espresso drinks to its menu, Dunkin’ Donuts might look like it’s trying to be another Starbucks Corp.

Well, it’s true that Dunkin’ Donuts is experimenting with WiFi access in a few Chicago shops and considering music in more of its stores -- two features of Starbucks outlets. But although its espresso launch has boosted its competitive position against Starbucks, Dunkin’ Donuts says it is content to maintain its distance from the Seattle coffee giant and stick to its workaday, on-the-go niche.

There’s no broad campaign encouraging customers to linger awhile at Dunkin’ Donuts’ pink-and-orange-themed shops -- and there are no plans to switch from the chain’s “small-medium-large” cup sizes to something akin to Starbucks’ oft-mocked sizes of tall, grande and venti.

“People say you’re taking on Starbucks, but we’re really not,” Chief Executive Jon Luther said recently. “All we want to do is share some space with the coffee consumer.”

What the franchise chain is planning is to share that space by expanding westward -- only 70 of its stores are located west of the Mississippi River. The vast majority of its 4,400 domestic locations are in the Northeast and Middle Atlantic states. The chain expects much of its near-term growth in the upper Midwest, with eventual plans to reach the West Coast.

Dunkin’ Donuts is a unit of Canton, Mass.-based Dunkin’ Brands, whose parent is the British wine and spirits firm Allied Domecq. Dunkin’ Brands, which also franchises Baskin-Robbins ice cream stores and Togo’s sandwich shops, has its heaviest concentration of Dunkin’ Donuts locations in New England, where there are 1,700.

Dunkin’ Donuts is changing its menu again, planning to add iced beverages to its year-old line of espresso drinks, and broadening its small line of sandwiches with a new sirloin steak, scrambled eggs and cheese on a bagel.

The move comes as both Dunkin’ Donuts and Starbucks put greater emphasis on sandwiches to draw more afternoon customers and respond to moves by fast-food giants such as McDonald’s Corp. that now sell more premium coffees.

Dunkin’ Donuts customers interviewed outside a downtown Boston shop across the street from a Starbucks said they welcomed some of Dunkin’ Donuts’ changes -- as long as the chain didn’t abandon the basics.

“It’s quite a bit cheaper than Starbucks, and it’s convenient, and they’re fast,” said Sandra Jadotte, a 30-year-old downtown officer worker and three-times-a-week consumer of Dunkin’ Donuts’ no-frills coffee.

Brian Lam, 25, said he chose Starbucks when he wanted a strong blend of top-notch coffee but opted for Dunkin’ Donuts when he craved French vanilla flavoring. “I’m here for the caffeine strictly,” Lam said.

Although Dunkin’s doughnuts cemented the company’s name and reputation, they made up less than 15% of the chain’s total $3.6 billion in fiscal 2004 sales. Espresso beverages accounted for 10%, nearly twice what the chain expected when the high-end drinks were introduced early last year, Luther said.

Clearly, Starbucks and its huge sales of espresso are on the minds of Dunkin’ Donuts executives. In a recent news release, Dunkin’ Donuts said its new lattes and cappuccinos “helped the brand solidify its position as a viable competitor to premium coffee chains like Starbucks.”

And next summer, Dunkin’ Donuts will introduce the Turbo Ice: iced coffee with a shot of espresso.

Starbucks doesn’t appear to be worried: “Starbucks believes there is room for many coffeehouses in the marketplace that can meet different customer needs,” spokeswoman Valerie Hwang said.