Business

Dunkin’ is keeping beverage innovation humming during the pandemic as consumers look to treat themselves

A Dunkin’ worker hands a coffee out of a drive-thru window wearing gloves and a mask as the Coronavirus continues to spread on March 17, 2020 in Norwell, Massachusetts.

MediaNews Group | Boston Herald | Getty Images

While the coronavirus pandemic has disrupted daily commutes and morning runs for coffee, Dunkin’ Brands Group says a new theme has emerged — customers are treating themselves.

Consumers are selecting beverages that are harder to make at home, with both cold and specialty drinks taking off over the summer. The coffee company is hopeful the trend continues with new menu items like Planet Oat Oatmilk at all U.S. locations, and the permanent addition of Refreshers, which are made with green tea and flavored fruit concentrate. Both are bringing in a younger and more female demographic.

“When we look to the future, we are trying to build off of our core coffee heritage and leaning into ways to make it a bit more modern and relevant,” said Jill Nelson, Dunkin’s vice president of marketing strategy.

Dunkin’, along with other major fast food chains including McDonald’s and Chipotle, has been leaning into Gen Z marketing. The company recently teamed up with Charli D’Amelio, the most followed creator on TikTok, to launch The Charli drink, a Dunkin’ Cold Brew with whole milk and three pumps of caramel swirl. The marketing campaign included an opportunity to virtually hang out with D’Amelio, who has over 94 million followers on the platform, and get pointers on how to create socially engaging videos online.

Hundreds of thousands of Charli drinks were sold in its first five days. But the collaboration also worked in driving traffic to its app.

Dunkin’ saw a 57% increase in app downloads on the day the campaign launched versus its previous 90-day average. It hit a daily record for active app users that day as well. Plus, the week of its launch was its second highest this year in driving new DD Perks members to the loyalty program, Dunkin’ said.

The partnership came about organically after the company learned the star was frequently posting about her Dunkin’ consumption, Nelson said.

“For us to be able to put her drink on the menu board and have that partnership really showed how successful it can be to really just audit our consumers’ habits and then reflect them on the menu,” Nelson said. “We saw people not only coming in and buying it, but actually downloading and ordering through the app.”

Capturing younger consumers and engaging them on digital is a tactic major restaurant chains are banking on for continued future growth. Piper Sandler’s recent “Taking Stock with Teens” survey of Gen Z found Dunkin’ was in the top five restaurant brands for this cohort, coming in at number 4, and that food spending was the top wallet priority.

Dunkin’ CEO Dave Hoffmann told CNBC over the summer that restaurant companies are in “fight mode” as the pandemic has created unprecedented challenges across the industry.

In the second quarter, Dunkin’ saw its same-store sales decline by 18.7% in the U.S. That number rebounded to low single-digit drops through July 25, and despite the declines in visits, sales were bolstered by higher average tickets. When Dunkin’ reports earnings for the third quarter, that metric will once again be in focus as many companies are starting to show a rebound in sales, even as the pandemic continues on with cases rising around the country.

Dunkin’ shares, which have a market value of $7.4 billion, have risen nearly 18% since the start of 2020.

Nearly all companies, regardless of industry, have faced new challenges and pivoted operations during the last seven months. Dunkin’ continued its beverage innovation, testing from home, and getting test drinks into stores that were within driving distance of headquarters, said Paul Racicot, director of global culinary innovation. This ultimately allowed the company to test nine different drinks, including Coconut Cocoa Infused Cold Brew and Layered Iced Tea, over the summer and hold virtual taste meetings to discuss products.

“We kept the ball rolling and didn’t stop,” Racicot said, adding that makeshift labs were a staple in the homes of those on the R&D team. “If you looked at my porch, we had coffee equipment, different brewing equipment, a little refrigerator that was holding samples.”

Heading into the holiday season, Nelson said the company will continue to leverage these insights to make this challenging year a bit better for customers.

“People are looking for bright spots right now,” she said.

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