Correction to This Article
A Sept. 7 Business article misstated the number of Dunkin' Donuts locations in the District. There are nine locations within the District and 80 more in the surrounding area.

Big Fight Brews For Average Joe

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By Michael S. Rosenwald and Chris Kirkham
Washington Post Staff Writers
Thursday, September 7, 2006

At the corner of Eighth Street SE near Pennsylvania Avenue, just steps from the busy Eastern Market Metro station and not far from a pet store called Pawticulars, there is a Starbucks, naturally. Lots of foot traffic. People walking their dogs. Going to work. Coming home. Stopping for tall lattes.

Now, 40 steps away from Starbucks, there is a Dunkin' Donuts just 10 days old -- making this corner not just any corner but the host of a brewing battle: Medium vs. grande. Good, quick and hot vs. Colombia Nariño Supremo. Metal frame chairs vs. comfy couches.

As part of its plans to expand from ubiquitous New England doughnut chain to ubiquitous American coffee chain, Dunkin' Donuts will announce plans today to add 325 stores in Washington and Baltimore by 2010, marking the region as a focal point of its effort to open more than 10,000 new stores around the country by 2020. A similar announcement has already been made in Chicago, and several more are in the works around the country.

The brash expansion by the average joe Dunkin' Donuts, which has 4,400 stores compared with 8,600 for the more upscale Starbucks, has been the talk of the coffee and franchising worlds in recent months. The discussion has been helped in part by the company's carefully orchestrated media and advertising blitz, and also by the question that now seems to be on the tip of coffee drinkers' tongues everywhere: How much more do we need?

"People have been predicting that we'd hit a saturation point two years out for as long as a decade," said Bill Hulkower, a food analyst for Mintel International Group, a Chicago market research firm. "At some point, you can't have a coffee shop for every man, woman and child."

But with Dunkin' Donuts going nose-to-nose with Starbucks, it could come close. "This is gonna sound sort of loose, but we want to be where there are people," said Patrick George, the company's regional vice president for Washington and Baltimore.

As it stands now, there is about one coffee or doughnut shop for every 10,000 people in the United States, according to Mintel. And that's not counting fast-food chains and gas stations, which are upgrading their coffee offerings, or companies such as Coca-Cola, which is now infusing a new cola with coffee.

In New England, where Canton, Mass.-based Dunkin' Donuts is strongest, there is one Dunkin' Donuts for every 5,000 to 6,000 people. But in the D.C. area, as in many other major metropolitan regions, it is much more sparse. Dunkin' Donuts has just 200 stores around here, 89 of them in the District. There are 382 Starbucks locations in Maryland, Virginia and the District.

Dunkin' Donuts executives said the new strategy was well under way before three private equity firms -- including the District's Carlyle Group -- bought the company last year for $2.43 billion. "It was certainly the company's idea, but we fully endorsed the growth strategy and it was absolutely one of the reasons we pursued the company," said Sandra J. Horbach, a managing director for Carlyle.

Dunkin' Donuts reported revenue of $3.8 billion for 2005.

A Starbucks spokeswoman said the company doesn't comment on its competition. It released a statement that said in part: "Starbucks is proud to be credited with creating the specialty coffee industry in which a variety of coffeehouses thrive today. As Starbucks continues to generate awareness for specialty coffee around the world, the category grows and others may wish to enter the market."

Michael Coles, chief executive of Caribou Coffee, a national coffee chain based in Minneapolis, said, "I just don't think Dunkin' Donuts compares to what we offer. It's a good entry point for gourmet coffee, but people don't wind up landing there. Once they are introduced to gourmet coffee, they are going to look to other places to expand their horizons. I think Dunkin' Donuts makes the market that much bigger."


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© 2006 The Washington Post Company

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