How is America’s largest doughnut chain doing in the war over breakfast? Dunkin’ Donuts’ quarterly revenue report didn’t meet expectations yesterday and the company is also noting a drop in customer traffic. CEO Nigel Travis said Dunkin’ Donuts raised prices to make up for higher labor costs, and in a statement senior vice president Chris Fuqua pointed to a “short-lived consumer malaise” that affected the whole industry during the quarter. But industry analysts say the company is still trying to figure out how to maintain breakfast dominance as McDonald’s and other fast-food restaurants turn their attention to the increasingly popular morning meal.
“With elevated breakfast programs from McDonald’s and Burger King, that’s put pressure on Dunkin’ domestically,” said restaurant consultant Aaron D. Allen, founder and CEO of Aaron Allen & Associates.
According to the market research company NPD Group, breakfast has been the fastest growing meal of the day for fast-food joints, and the upward trend is expected to continue over the next few years as “speed, affordability and portability” remain high priorities for consumers.
“In 2009 and 2010, traffic was negative for the industry, and still breakfast was the only meal occasion that’s been able to hold its own. Since then it’s been growing 2, 3, 4 percent every year,” NPD analyst Bonnie Riggs said.
McDonald’s took note last year and responded by offering all-day breakfast, resulting in a big sales bump. Taco Bell followed suit in March with a $1 breakfast menu. Burger King took an early leap into the arena in 2014 when it started offering burgers for breakfast, and it’s continued to roll out new breakfast items since then. Subway entered the breakfast business in 2010.
The extra competition means Dunkin’ Donuts has been forced to work harder to win the morning crowd. It’s currently developing a better-tasting egg patty that contains more egg, and, according to the Chicago Tribune, it’s also trying to improve bacon and bagel quality. Dunkin’ is also expanding its coffee offerings with items like cold brew and a macchiato. While Allen said the company has done a “terrific job of stalking and shadowing Starbucks,” other observers find Dunkin’ Donuts’ position in the coffee sphere tenuous.
“A small coffee now runs about $1 at McDonald's, compared to $1.59 at Dunkin' and $1.85 at Starbucks. As retailers such as Macy's and the Gap have discovered, the murky middle is never a good place to be when consumers are increasingly choosing either the cheapest option or the one with the highest quality. Unfortunately for Dunkin', it can claim to be neither,” wrote Bloomberg’s Shelly Banjo.