P&G, Dunkin' Donuts pour out coffee strategy

BOSTON — Starting this month, packaged Dunkin' Donuts coffee will be sold by the likes of Costco, Wal-Mart and Kroger in a bid to get customers to brew the brand at home, not just get it at Dunkin' outlets.

The distribution deal with Procter & Gamble is also about introducing the New England-bred brand to new customers in the West and South where Dunkin' is expanding, with plans to triple U.S. stores to 15,000 by 2020.

To support that growth, Dunkin' and P&G say they've lined up 40,000 grocery and other retail stores nationwide to launch packaged coffee.

Canton, Mass.-based Dunkin' Brands and Cincinnati-based P&G planned to announce details today. They first disclosed their joint venture in February.

The deal pairs Dunkin', a 57-year-old chain with 5,400 U.S. stores and 1,800 overseas locations, with P&G, the world's largest consumer-products company.

Dunkin' came under new ownership by a consortium of private-equity firms last year and has been moving into markets in the Midwest, West and South as part of a strategy to challenge its upscale rival, Seattle-based Starbucks, which has long offered packaged coffee for retail sales.

P&G will roast Dunkin's packaged coffee according to Dunkin's specifications and be responsible for distribution as well as a national marketing campaign.

"For P&G, it gives them an entry into a premium coffee brand with a company that has a lot of loyalists," said Malcolm Knapp, president of the New York-based restaurant-industry consulting company Malcolm M. Knapp Inc.

"Dunkin' Donuts gets P&G's distribution expertise and a new source of income — more than they would have on their own," he said.

Dunkin' packaged-coffee sales begin this week in selected stores and will expand more broadly next month.

The stores will carry at least five ground-coffee varieties, with Dunkin's original medium-roast blend also available in whole beans.

Big-box retailers that will sell the coffee include Wal-Mart Stores, Target, Costco Wholesale and BJ's Wholesale Club. Also on board are drug chains CVS Caremark, Rite Aid and Walgreen.

But most of the retailers are supermarkets, including Albertsons and Kroger, parent of Fred Meyer and QFC.

The packaged-coffee rollout is intended in part to familiarize customers in new territory to the brand and support sales in Dunkin' stores.

"You're using the store product to reinforce the brand before the stores get there," Knapp said. "More often than not, it's the other way around."

Robert Goldin, of the Chicago-based restaurant and retail consulting firm Technomic, said Dunkin' and P&G will compete in a packaged-coffee retail market that has seen slower growth than restaurant-coffee sales and shows no signs of catching up.

"Away from home is where the action is with respect to coffee," Goldin said.