CANTON, MASS. — Dunkin' Brands Group, Inc. is finding success in categories outside of its Dunkin' business's core hot drip coffee offerings. Espresso sales in the third quarter grew more than 40% year-over-year, led by strong performance in new Signature Lattes line extensions. The category now accounts for 10% of the system-wide sales.
Growth was driven by speedy service and an afternoon happy hour deal, said David Hoffman, chief executive officer and director at Dunkin’ Brands.
“We're seeing that espresso has a nice attachment with donuts and other savory items,” he said during an Oct. 31 conference call with analysts. “It skews a little younger, a little more female and a little more toward our target growth areas for the future.”
Defending Dunkin’s leadership in the increasingly competitive hot drip category remains a priority, as does beverage menu innovation.
“Espresso has showed us we can get into other areas that speak to these coffee adventures,” he said. “There’s a lot there that our R.&D. team is working on, not only around hot, but we’ve got some of the best credentials in the industry around iced.”
The Go2 value deal and a new remodel strategy also are driving more customers into stores. The company’s “NextGen” store format helped deliver Dunkin’s best traffic year-to-date since 2015, Mr. Hoffmann said. Key elements of the new design, including eight-headed tap systems, front-facing glass cases and enhanced pick up areas drove double digit growth in core ice beverages, bakery performance and mobile orders.
“NextGen quietly has been one of our single best traffic drivers and continues to be so as we add more units,” Mr. Hoffmann said.
The company expects to have 500 NextGen location by the end of the year.
Canton-based Dunkin’ Brands posted net income of $72.4 million, or 86c per share on the common stock, in the third quarter, up 9.5% from $66.1 million, or 79c per share, in the same period last year. Revenues of $355.9 million were up 1.7% from $350 million.
Dunkin’ U.S. had comparable store growth of 1.5% in the third quarter. Segment profit rose 5% to $128 million from $122 million in the same period a year ago. Total revenues increased nearly 6% to $166 million from $157 million.
Dunkin’ International had comparable store sales growth of 7.3%. Segment profit was up 8% to $4.9 million from $4.6 million.
Comparable store sales grew 3.6% for Baskin Robbins. U.S. segment profit in the third quarter fell 5% to $9.7 million from $10.2 million. Total revenues of $14.3 million were up 5% from $13.7 million. Revenues at Baskin-Robbins International fell slightly while comparable store sales were up 6%. Segment profit was $31 million, up 9% from $12 million.