America Buys Dunkin On the Nasdaq
After six decades as a privately owned coffee company, Dunkin Donuts entered a new era on July 27, 2011 when they began offering stock in the company on the New York stock exchange. Trading under the ticker symbol DNKN, stock in Dunkin Brands, the parent company that owns both Dunkin Donuts and Baskin Robbins, opened at $25 per share, well above the initial offering price of $19 per share. DNKN shares closed out the day at $27.85, a whopping 47% gain over the IPO price. Dunkin Brands sold 22.3 million shares in its first trading day, raising a total of $423 million for the company and proving America not only runs on Dunkin, it’s quite willing to invest in it.
According to the company, Dunkin Brands will use the earnings to pay down debt and pave the way for expansion across the United States and in foreign markets. Analysts who’ve studied the market note that Dunkin Donuts is a strong Northeast regional brand, and may have trouble gaining traction in other regions, but feel that it’s strong name recognition and brand identity will give Dunkin a major boost in other markets.
For those of us who grew up with Dunkin Donuts, it’s a no-brainer. While the company made its impact with donuts, made fresh every four hours, they’ve successfully rebranded as America’s coffee company — the place where the everyday working joe can get an honest cup of great coffee. The company pioneered the concept of coffee to go and jumped on the drive thru coffee bandwagon long before it was chic to have a drive-up window. The orange and pink DD logo is ubiquitous on the East Coast — it’s a rare town that doesn’t boast at least one Dunkin Donuts coffee franchise, and larger cities seem to have one on every corner. In some towns, it’s not uncommon to see a Dunkin Donuts drive thru across the street from a Dunkin Donuts drive thru along busy commuter routes — often owned by the same franchisee who wants to take advantage of going-to-work traffic in both directions.
Dunkin Donuts has been flexing their market expansion muscles for several years now. The first Dunkin Donuts franchise opened in Worcester, Massachusetts in 1955, just five years after Bill Rosenberg opened the very first Dunkin Donuts coffee shop in Quincy, Massachusetts. By 1963, there were over 100 Dunkin Donuts, most in Massachusetts. As of 2010, you could buy Dunkin Donuts coffee at over 9,700 coffee shops around the world, including 3,000 in foreign countries that include China, Peru, Colombia, Kuwait, Pakistan, Germany, Japan and Saudi Arabia. In the United States, you can get Dunkin Donuts coffee in almost any state east of the Mississippi, but if you want your Dunkins coffee on the West Coast, you’ll be hard pressed to find one. There are only 75 Dunkin Donut franchises west of the Mississippi, most of them in Arizona, Texas, Nevada and New Mexico. The scarcity of Dunkin Donuts coffee on the West Coast has led more than one returning Bostonian or New Yorker to request they be met at the airport with a hot cup of Dunkins.
That situation may not last long. Included in Dunkin Donuts expansion plans is the goal of having a total of 15,000 Dunkin Donuts coffee shops in the United States by 2020. They’re on target to achieve the goal, having opened more stores in 2010 than any other restaurant chain, including McDonalds. As far as their main competition, Starbucks, is concerned, Dunkin Donuts coffee shops are gaining market share at a time when Starbucks is trying to recover from closing hundreds of its stores nationwide in 2008.
Dunkin Brands is poised to do well in the future, say analysts. Dunkin Donuts is a well recognized brand in a market sector — coffee and breakfast foods — that’s expected to continue growing over the next decade. If you’re looking for an investment that’s on track to stay steady and grow over time, investing in a company that has been selling coffee America loves for over 60 years is a pretty good bet.