15 Oct 16 Dunkin’ Donuts bets on SA’s sweet tooth
Rising demand for quality coffees and sweet treats has lured yet another American favourite to SA’s shores.
Dunkin’ Donuts, the Massachusetts-based doughnut and coffeehouse chain, has opened its doors in Cape Town at N1 City mall.
It by-passed the rather more competitive sweet streets of Johannesburg, where rival Krispy Kreme launched to much hype last year and has stores in prime footfall areas such as Sandton’s Gautrain station and the Zone@Rosebank.
Global coffee giant Starbucks also opened a flagship outlet in Rosebank. It has a presence in the Mall of Africa in Midrand and in Menlyn Maine in Pretoria as well.
Grand Foods CEO, Alan Keet, says the decision to open the first Dunkin’ Donuts store in the Western Cape made sense, as Grand Parade Investments (GPI) is based there.
The gaming group has the master franchise agreement for the brand. Grand Foods is its food division. Another American stalwart, Burger King, also falls in its portfolio.
“Starting at home made sense. Here we can get the brand right and keep an eye on it as we open up in clusters. We plan to have opened five outlets in the Western Cape by Christmas. We will be getting to Gauteng only in the first half of next year,” says Keet.
Dunkin’ Brands and GPI aim to open more than 250 Dunkin’ Donuts outlets and more than 70 Baskin-Robbins ice-cream shops in SA.
Despite the economic slowdown, global brands continue to set their sights on SA, where expanding consumerism and a strong mall culture present an avenue for potential growth.
Keet says Dunkin’ Brands was interested in coming to SA long before the tie-up with GPI.
Dunkin’ Brands “knew the potential of the country. The coffee culture in SA is expanding and is forecast to grow by about 40% in the next couple of years. We were in talks for about 18 months, and the deal was consummated in December last year,” says Keet.
Keet says the price of the goods will be comparable with those sold in other coffee shops in SA.
“If you did a survey of different stores [coffee shops] in SA you would find that we are within range. For example, our medium cappuccino is R25. We are very affordable despite being an international brand. We forecast that the franchise will start making a profit in 2018,” he says.
Burger King has had some difficulty in gaining traction locally, following the initial hurrah. For the year to end-June it added 24 outlets, taking the total to 62 — below the reduced target of 75-80.
GPI scaled back its expansion plans for the chain and lowered its margin expectations in acknowledgment of intensifying competition and rising cost pressures.
Vunani equity analyst Anthony Clark says GPI previously stated that it planned to exit its gaming assets in two years’ time. “For quite some time now, it has been withdrawing from its casino operations.
“It has said the regulations and taxes involved in gaming have prompted it to invest in its food businesses,” says Clark. “It has given very little information about the costs involved in the Dunkin’ Donuts launch. “
Challenges for the company include making South Africans aware that it sells more than just doughnuts, according to Keet. Grand Parade needs to “make people understand, despite the name, it’s a coffee and bakery offering,” he said.