Milling & Baking News - May 17, 2011 - 29

Geographic expansion, afternoon sales gains key in Dunkin’ strategy
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notes due in December 2018. Remaining proceeds will be used for working capital and general corporate purposes. As of April 30, 2011, $475 million in the 9 5/8% notes were still outstanding. An overview of the Dunkin’ Brands business described the company as the leading franchisor of quick-service restaurants that serve coffee beverages and baked goods, as well as hard ice cream. The company has 16,000 points of distribution in 57 countries. “Dunkin’ Donuts holds the No. 1 position in the U.S. by servings in each of the Q.S.R. categories of ‘hot regular coffee,’ ‘iced coffee,’ ‘donuts,’ ‘bagels,’ and ‘muffins’ and holds the No. 2 position in the U.S. in each of the Q.S.R. subcategories of ‘total coffee’ and ‘breakfast sandwiches,’” Dunkin’ said. The company operates its business in four segments: Dunkin’ Donuts U.S., Dunkin’ Donuts International, Baskin-Robbins International and Baskin-Robbins U.S. While Baskin-Robbins is the top U.S. quick-service restaurant chain in the hard ice cream category, the business is far smaller than Dunkin’ Donuts. In 2010, Dunkin’ Donuts (domestic and international) accounted for $416.5 million, or 76%, of total company sales. Within the Dunkin’ business, U.S. revenues totaled $402.4 million with international sales totaling $14.1 million. Many quick-service restaurant chains comprise a mix of franchise and company-owned stores, but Dunkin’ is nearly 100% franchised, which the company said is advantageous.

“Because we do not own or operate a significant number of stores, our company is able to focus on menu innovation, marketing, franchisee coaching and support and other initiatives to drive the overall success of our brand,” Dunkin’ said. Elaborating on the growth strategy, Dunkin’ said it plans to focus on existing markets east of the Mississippi river where the company currently

has one Dunkin’ Donuts store for every 48,400 people. By contrast, the company has one store for every 9,700 people in its traditional core markets of New England and New York. “In certain eastern U.S. markets outside of our core markets, such as Philadelphia, Chicago and South Florida, we have already achieved per capita penetration of greater than one Dunkin’ Donuts store for every 25,000 people,” the company said. While finding ways to build its coffee and beverage sales received top billing in the company’s growth strategy, grain-based foods also were identified as offering opportunities.

“As we maintain and expand our current leading market position in the breakfast daypart through innovative bakery and breakfast sandwich products like the Big ‘N Toasty and the Wake-Up Wrap, we plan to expand Dunkin’ Donuts’ position in the afternoon daypart (between 2:00 p.m. and 5:00 p.m.), which currently represents only approximately 12% of our franchisee-reported sales,” Dunkin’ said. “We believe that our extensive coffee- and beverage-based menu, coupled with new ‘hearty snack’ introductions, such as Bagel Twists, position us to grow share in this daypart. We believe this will require minimal additional capital investment by our franchisees.” Financial results during the years the private equity group has owned Dunkin’ Brands have been checkered. In the year ended Dec. 25, 2010, Dunkin’ Brands net income was $26,861,000, down from $35,008,000 in 2009. By contrast, the company sustained a loss of $269,898,000 in 2008. Revenues during this period were similarly bumpy. Total revenues of $577,135,000 in 2010 were up from $538,073,000 in 2009 and compared with $544,929,000 in 2008. Comparable stores sales growth for Dunkin’ Donuts in 2010 was 2.3%, versus a minus 1.3% in 2009, a minus 0.8% in 2008 and 1.3% in 2007. BaskinRobbins had a tougher time still, with negative sales growth of 5.2% in 2010, 6% in 2009 and 2.2% in 2008. Only in 2007 did Baskin-Robbins have positive comparable store sales growth, at 0.3%. Under the proposed offering, Dunkin’ Brands shares would trade under the market symbol DNKN on Nasdaq. MBN said Doug VanDeVelde, senior vicepresident of marketing and innovation at Kellogg. “We heard the strong desire from people within the glutenfree community, especially parents, for more affordable foods that they can serve their families, and we are helping to fill that need.” Kellogg said production of the new cereal will take place in a separate facility that has been making glutenfree products for nearly a decade. Each batch of cereal will be tested to ensure its gluten-free status, as will the production line. MBN
Milling & Baking News May 17, 2011 / 29

Kellogg to launch Rice Krispies Gluten Free in June
BATTLE CREEK, MICH. — The Kellogg Co. next month will launch Rice Krispies Gluten Free cereal. The cereal, which will be sold alongside original Rice Krispies, eliminates barley malt (the source of gluten in the original Rice Krispies cereal) and is made with whole grain brown rice to differentiate it from the original and for flavor. Each serving of the new gluten-free cereal contains 120 calories, less than 1
bakingbusiness.com / world-grain.com

gram of sugar, 1 gram each of fat and fiber, 3 grams of protein and 190 mg of sodium. The suggested retail price for new Rice Krispies Gluten Free cereal is the same as the original cereal. “Kellogg is pleased to announce plans for the launch of our first-ever gluten-free cereal — Rice Krispies Gluten Free — which should start hitting store shelves by early June,”

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Milling & Baking News - May 17, 2011

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