October 25, 2018
Coffee Competition is Heating Up
Move over Cola Wars, this is the decade of the Coffee Wars. Starbucks is the clear leader, with brand saturation coast to coast, but the former “Dunkin Donuts” brand is retooled and ready for battle.
Slowly, over the past few years, Dunkin’ has been increasing its breakfast menu of quick to-go items and expanding its coffee and beverage offerings, both in the stores and on grocery shelves. There were rumors that the brand might be setting itself up to go toe-to-toe with Starbucks, but, until now, that was mostly speculation.
This past week, Dunkin’ announced that it had updated its coffee equipment and improved its espresso recipe and employee training on specialty coffees. With “espresso certification” in hand, Dunkin’ employees are ready to serve up warm refreshment for the holiday season. This move is a clear indication that Dunkin’ is ready to take the fight directly to Starbucks’ core product offerings.
But, as with the cola wars of the 80s between Coke and Pepsi, there’s a dark horse third party that’s a big part of the mix. McDonald’s has been tweaking its “café” line as well, hoping to lure customers that aren’t interested in paying higher prices for Starbucks coffee. Starbucks has never shied away from the pricing, saying the quality, service and intangible benefits of its store and products justified the pricing. Customers clearly agreed, making the coffee chain one of the most prominent beverage brands in the country.
Now, though, consumer trends are shifting. People want quality but they also want better prices. McDonald’s had the market on that, though not necessarily the assumption of equitable quality. Dunkin’ created a niche for itself right in the middle. Stores were more focused on to-go customers, prices were slightly lower and quality was getting better. Then, there was the built-in donut trade. People who grew up on Dunkin’ Donuts were easily willing to grab a premium coffee drink with their muffin or Munchkins.
Meanwhile, coffee offerings that were “premium” a decade ago are now commonplace. Millennials grew up sipping espresso and cappuccino, so now those products are expected rather than extras. Dunkin’ decided it needed to be a coffee destination, not just a place to get your donut fix. Now, the Coffee Wars fight card is set. Dunkin’ will compete with McDonald’s for customers looking for quick and cheap, and with Starbucks for customers looking for higher quality.
This branding battle should be fun to watch.