(alarm rings) - Time to make the donuts.
- [Narrator] "Dunkin'" has long said,
"It's on time to make donuts."
- Who else goes to that trouble?
- But it's not just pastries.
Over its 70 plus years
"Dunkin'" has repeatedly spotted and adapted
to new trends even when that meant focusing less
on donuts.
- Donuts literally used to be part
of their name and now it is not.
And it definitely reflects how their sales
have really changed and how beverages
become so much more important
than just selling donuts.
- [Narrator] From 2009 to 2019,
a time when Dunkin' introduced many drink options
and rebranded, it grew from around 6,000
to over 9,000 locations.
The shift away from donuts and towards drinks is
just one change that has helped the company evolve
from a New England diner to a worldwide chain
worth around $9 billion.
This is the economics of "Dunkin'".
In 1948 restaurateur, William Rosenberg
opened a diner called "Open Kettle"
in Quincy, Massachusetts selling coffee
for 10 cents and donuts for five.
Two years later, he changed the name
to "Dunkin' Donuts" inspired
by seeing others dunk donuts into their coffee.
It was one of the first trends the company capitalized on.
- Donuts were actually served
to troops during the wars.
- [Commentator] Behind the American lines
in Italy, a brief interlude
and good old fashioned donuts.
- And when troops came home, it was 1950s
and people were going back to offices
and donuts were a really great way to quickly
have breakfast on the go.
And "Dunkin' Donuts" really capitalize on that.
- Dunkin' the magic munchkin.
- [Narrator] The company took donuts a step further
in the early 1970s when they introduced the munchkin
as a way to use the leftover dough
from the center of donuts.
- This is what a munchkin looks like.
They have them down at "Dunkin' Donuts"
in quite a few flavors.
- [Narrator] Donuts continued
to be Dunkin's focus through the nineties
when trends began to shift.
In the 1990s, 2000s, America was generally becoming
more health conscious.
And donuts for all their tasty goodness
is not really known
as a very healthy breakfast alternative.
So companies like "Dunkin' Donuts" need to think
about what else could they serve.
Meanwhile, "Starbucks" really was starting
to take on the US at that time
and was expanding a lot.
And what they were doing was inventing new kinds
of drinks.
- [Narrator] Customers were looking
for caffeine and a lot of it.
The number of US coffee houses doubled
between 1996 and 2001.
So after decades of focusing on donuts,
in 2006, "Dunkin'" made one
of its first moves away
from the pastries when it introduced the slogan,
"America runs on Dunkin'".
Coffee and beverage sales were popular
for quick service restaurants
since they have better profit margins
than most offerings, like food.
- When you think of a breakfast sandwich
or a baked good that involves labor,
it often involves many different types
of ingredients.
It might involve some kind of packaging,
whereas coffee at its simplest is just coffee
in a cup.
The labor tends to be less
and that does make it more profitable generally
for these drinks.
- [Narrator] By 2011, "Dunkin'" was selling
more hot and iced coffee
than any other fast food chain in the US,
including "Starbucks".
In New England and New York,
it hit 57% of the fast food coffee market.
At the time, "Dunkin'" had 6,800 locations,
around half the amount it has now
and bigger changes lay ahead.
In 2018, Dunkin's rebrand and name change to go
by just "Dunkin'" was a big step.
That year, beverages made up 60%
of Dunkin's sales.
- I think one of the important things
to recognize is caffeine is addictive
and everyone likes their morning coffee
and that is a ritual.
So people often go to get coffee every morning
where they might not necessarily
get a donut every morning or some kind of food.
- [Narrator] To give customers more options
for their caffeine fix, "Dunkin'" continued
to expand their drink menu releasing espressos,
cappuccinos, lattes and Americanos.
- [Artist] Take a sip of "You've got this,"
with Dunkin' Espresso drinks.
- [Narrator] And in doing so,
it went toe to toe with "Starbucks".
- "Dunkin'" is really trying to
in some ways get into Starbucks's lane.
They've offered a lot
of different new kinds of beverages.
They invested in machines to offer espresso.
They offer cold drinks, they offer blended drinks
and they really are trying to,
I would say, compete more with "Starbucks",
whereas "Starbucks" probably still thinks
of itself as singular.
- [Narrator] After the push for more drink sales,
in 2019, "Dunkin'" was one
of the top coffee sellers
of quick service restaurants selling
around 1.6 billion hot and iced coffees.
In 2021, "Dunkin'" sold over 4.4 billion cups.
While caffeine is a big seller,
Dunkin's drink focus isn't just on drip.
The company said that highly visual beverages
are a focal point of its menu.
They've also launched more specialty drinks
like Matcha and Chai.
Between all the flavors and coffee blends,
they've added nearly 50 new menu items
in the last four years.
But on the food side of the menu,
the brand struggled during the pandemic
when the breakfast category was hit hard
by commuting changes caused by lockdowns.
Dunkin's decline in sales would've
been nearly 5% points larger
if temporarily closed stores were included
in those numbers.
But once again, hot and cold drinks
with their high profit margins continued
to be top sellers on the menu.
- Earlier in the pandemic,
these cold drinks actually
were a real saving grace for a lot of coffee chains,
in part because people would order them
in the afternoon.
It's really created a new day part
for them where they didn't have it before.
And so that's been really helpful for them
when breakfast really took a hit early
in the pandemic.
Around that time,
"Dunkin'" was releasing new drinks.
For example, in 2020
"Dunkin'" announced the new--
- [Actor] Dunkin' Refresher.
- [Narrator] And this summer they came out
with three iced pumpkin drinks
and a new flavor of refresher.
- Cold drinks really have exploded in popularity
including during the pandemic, and a lot
of it has to do with social media, with TikTok.
70% of sales for a lot of these chains now
is these cold beverages
which is a huge amount of growth
in a very short amount of time.
- [Narrator] As beverages continue
to grow more popular,
Dunkin's experience in developing buzzy drinks
may help it create more in the future.
- "Dunkin'" certainly has changed from the 1950s
when it was just known
as a coffee and donut company.
They've expanded their drinks,
they've expanded their food
and thanks to franchising,
they've expanded their locations.
So I do think they've evolved a lot
from their roots in Massachusetts.
- [Narrator] As obstacles caused
by the pandemic continue
to challenge companies across the board,
it remains to be seen if Dunkin's history
of evolution will continue.
(upbeat music)