The coffee shop consolidation continues

The coffee shop consolidation game continues following the 30 October news that Inspire Brands is acquiring Dunkin’ Brands Group, the parent company of Dunkin’ and Baskin-Robbins. While it may be the last coffee brand acquisition we see this year, it certainly won’t be “the last” — given the current global environment, I am sure we will see more M&As in the not-so-distant future. Atlanta, Georgia-based Inspire Brands’ portfolio includes more than 11,000 Arby’s, Buffalo Wild Wings, SONIC Drive-In, and Jimmy John’s restaurants worldwide. The acquisition of Dunkin’ increases Inspire’s brand portfolio and strengthens it competitively.

“Inspire Brands’ acquisition of Dunkin’ Brands will shift the industry’s focus from competition between individual brands to competition between multi-brand owners,” said Alex Jarman, research analyst at London-based global market research firm, Euromonitor International. With Dunkin’ in its portfolio, Inspire will become the second-largest restaurant operator in the United States. Some of its closest competitors will become Yum! Brands and Restaurant Brands International. “Similar to travel groups such as Hilton or IAG, a multi-branded structure allows the use of the most successful parts of each business to grow the entire portfolio,” he said. “Scale is key for this growth strategy and by adding Dunkin’ to its portfolio, Inspire has given all of its brands strong growth potential.”

Commenting on the merger, Dave Hoffmann, CEO of Canton, Massachusetts-based Dunkin’ Brands, said, “[This merger] is a testament to our world-class group of franchisees, licensees, employees, and suppliers who have worked together to transform Dunkin’ and Baskin-Robbins into modern, relevant brands…I am particularly proud of our actions since March of this year. During the global pandemic, we have stood tall. We’ve had each other’s backs and are now stronger than ever. We are excited to bring meaningful value to shareholders who have been with us on this journey and believe that Inspire Brands, a preeminent operator of franchised restaurant concepts, will continue to drive growth for our franchisees while remaining true to all that is unique and special about the Dunkin’ and Baskin-Robbins brands.”

But like many foodservice companies this year, Dunkin’ has struggled during the pandemic. According to Jarman, one of the most immediate benefits of the deal will be the sharing of customer, sales and loyalty data between Inspire and Dunkin’ because this information will be critical to Dunkin’s future success as it continues to navigate consumers’ changing habits due to the pandemic. “Dunkin’s sales suffered earlier this year as many consumers stopped picking up coffee on their morning commute,” he said. “Having access to consumer data from Inspire’s other brands will help Dunkin understand how to reach consumers beyond breakfast and the morning commute.”

In 2018, Dunkin’ Brands announced that Dunkin’ was officially dropping ‘Donuts’ from its name, officially becoming Dunkin’ in January 2019. When announcing the new moniker, the company said, “The name change is one of many steps Dunkin’ is taking to transform itself into the premier beverage-led, on-the-go brand.”

Dunkin’ has had the tagline “America Runs on Dunkin’” for many years despite it not being a true national brand. Dunkin’ continues to open stores throughout the US, but the roll out has been slow. Jarman noted that the digital boost Inspire has given its other brands may help Dunkin’ expand beyond its East Coast stronghold and pose stronger competition against Starbucks in other parts of the country. “Conversely, acquiring Dunkin’ will give Inspire’s international prospects a significant boost. More than 40% of Dunkin’s stores are outside the US and data from those locations could help Inspire further expand its existing brands internationally or even acquire brands based outside the US.”

It will be interesting to see if (and when) Inspire does ramp up Dunkin’s store openings, where they will be – in the US or internationally (or simultaneously) – and what the store concepts will be: regular store formats, smaller footprint units, joint locations with Baskin-Robbins, or a combination of all three.

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