Dunkin' Donuts to target Starbucks customers after loyalty scheme shake-up

What's Behind Dunkin Donuts' Sales Slip?
What's Behind Dunkin Donuts' Sales Slip?

Dunkin' Donuts is on a drive to win customers from Starbucks after the rival coffee and snacks chain changed its loyalty scheme to favor higher spending customers over frequent buyers.

Nigel Travis, chief executive of Dunkin' Brands Group Inc (DNKN.O), told Reuters he expected some Starbucks (SBUX.O) customers to be angered by the move, creating an opportunity for his company's doughnut and coffee shops to win them over.

"We feel excited about the change to Starbucks' loyalty program," he said in an interview during a trip to Frankfurt.

"We've been targeting customers with $5 gift cards," he added, while declining to quantify the possible impact on the Dunkin' Donuts business.

Under Starbucks' previous rewards program, customers earned redeemable points for every purchase, whereas the new program awards points for every dollar spent, putting customers who buy cheaper items at a disadvantage.

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Maxim Group analyst Stephen Anderson said after Starbucks' announcement last month that its customers would have to spend $62.50 to receive their first beverage reward, compared with $40 under Dunkin' Donuts' loyalty program.

He estimates customer defections from Starbucks could add roughly 0.25 to 0.4 percentage points to sales growth at Dunkin' Donuts, excluding new outlets.

That would be a welcome boost for Dunkin' Donuts, which saw same-store sales in the United States slip by 0.8 percent last quarter, as the launch of all-day breakfast by McDonald's (MCD.N) and value-meal offers by rivals lured customers away.

British-born Travis, who previously held executive positions at video rental chain Blockbuster and pizza group Papa John's (PZZA.O), also said his group was eyeing growth in Europe.

The Canton, Massachusetts-based company added a net 55 Dunkin' Donuts franchise stores across Europe in 2015, bringing the total there to 221.

In Germany, where it has 70 outlets, Dunkin' aims to add about 20 a year, said Travis, who drinks seven cups of coffee a day.

He also said he was confident Dunkin' could make its business in Britain work, where it has had a rough start after announcing in 2013 a return to the market nearly two decades after exiting.

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(Editing by Mark Potter)

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