Dunkin' Donuts to open 1,400 outlets in China

Updated: 2015-01-09 13:32

By Paul Welitzkin in New York(China Daily USA)

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Dunkin' Donuts to open 1,400 outlets in China

Dunkin' Brands Group Inc, parent of Dunkin' Donuts, announced on Thursday plans to open 1,400 Dunkin' Donuts stores in China over the next 20 years. Provided to China Daily

Hoping to emulate the success of US chains like McDonald's, Pizza Hut and Starbucks, coffee and baked-goods company Dunkin' Donuts plans to open 1,400 restaurants in China over the next 20 years.

Parent company Dunkin' Brands Group Inc, based in Canton, Massachusetts, announced on Thursday it has entered into a franchise agreement with a joint venture between Jollibee Worldwide Pte Ltd, based in the Philippines, and Jasmine Asset Holding Ltd, a unit of RRJ Capital Master Fund II, LP, an investment firm based in Hong Kong and Singapore.

"They have to get the right formula to succeed in China," said Stephen Anderson, analyst at Miller Tabak + Co LLC in New York. "Having Jollibee as a partner is going to help them tremendously."

Jollibee is an American style fast-food chain based in the Philippines that has over 600 locations worldwide. Anderson said Dunkin' should also look to partner with service stations in China like the company does in the US in its China expansion. Will Dunkin' have to emphasize tea over coffee in China?

"I think so," Anderson told China Daily. "Still coffee can become a draw for the company. Remember Starbucks operates over 1,000 units in China."

George McAllan, international managing director, Dunkin' Donuts China said in an email, "We will emphasize our full lineup of beverages, sandwiches and baked goods in China. We will also continue to offer some locally-inspired menu items in order to cater to local tastes."

International expansion is not a new strategy for the company. Currently there are 16 Dunkin' Donuts locations in China. In late 2013, the company unveiled a franchise deal with Fast Gourmet Group to open 100 Dunkin' units in eastern China. It also operates over 900 outlets in South Korea.

Morningstar analyst RJ Hottovy said Dunkin's main product is coffee, not doughnuts, as roughly 60 percent of Dunkin's sales are beverages according to the company. "Although China is historically a tea-drinking culture, a number of restaurant companies - Starbucks in particular - has shown that there is still tremendous demand for coffee products in the region, so I expect that coffee will remain the core part of the menu. However, the company, using the knowledge of its joint venture partners, will certainly tailor its menu to accommodate local preferences," he told China Daily in an e-mail.

How does the company plan to market its most well-known product - doughnuts - which are still a novelty in China?

"We will continue to build awareness for our wide range of menu items, including our world famous doughnuts. We have created several doughnuts using flavors that are familiar to Chinese consumers, especially around our recent restaurant openings in Shanghai. We will also look for key moments to celebrate our coffee and doughnut heritage, including holidays like Global Donut Day and Global Coffee Day, which we celebrated in China and around the world in 2014," said McAllan.

The joint venture has exclusive rights to expand Dunkin' Donuts in Beijing, Chongqing, Fujian, Guangdong, Guangxi, Guizhou, Hainan, Hebei, Heilongjiang, Hong Kong, Hunan, Jiangxi, Jilin, Macau, Shanxi, Sichuan, Tianjin and Yunnan. The opening of the first restaurant is expected in the fourth quarter of this year.

Citing slower sales of packaged coffee in restaurants and pressure on joint ventures in Korea and Japan, Dunkin' Brands Group last month issued disappointing earnings guidance for this year. Dunkin' Brands expects US comparable store sales growth of 1 percent to 3 percent in 2015. The company also expects earnings, excluding items, between $1.88 and $1.91 a share. Analysts, on average, were expecting $2.02 a share, according to Thomson Reuters.