Starbucks Vs Dunkin’ Brands

Starbucks remains the undisputed king of coffee, and even the expansion of Dunkin' Brands into the Western United States won't be enough to dethrone the company.

Mar 27, 2014 at 4:10PM

Shares of Starbucks (NASDAQ:SBUX) have pulled back from their 52-week high of $82.50 as investors had concerns about slower same-store sales growth in the first quarter and the month of December. Going into March, winter weather issues could challenge second-quarter sales and put additional pressure on the shares. But with multiple growth drivers ahead, investors should view any pullback in the shares as a buying opportunity.

Rise in coffee prices not an immediate concern
Starbucks has fully covered its coffee bean needs throughout all of fiscal 2014 and part of fiscal 2015, so investors should not view this as an immediate concern. Rather, Starbucks has ample time to review its pricing options over the next year. Higher coffee prices could dampen fiscal 2015 EPS growth, but it remains too early for investors to accept this as a foregone conclusion. Dunkin' Brands (NASDAQ:DNKN) on the other hand has only secured its coffee prices for "most of 2014," according to management's comments on the fourth-quarter conference call on Feb. 6.

Starbucks could have a better position than Dunkin Brands in terms of coffee prices, especially in the grocery aisle.

Multiple drivers of growth as a hedge against coffee prices
If coffee prices remain high over the longer-term, Starbucks has several lines of business to fall back on such as Evolution Juice, La Boulange, or the company's recent decision to begin selling alcohol across thousands of locations.

Dunkin' Brands on the other hand has been heavily expanding its Dunkin Donuts brand across the Western U.S, which includes a planned expansion into California in 2015. While this could drive significant growth, unlike Starbucks Dunkin' Brands will have no fall back plan (besides Baskin-Robbins) if consumers are reluctant to pay higher prices for cups of coffee.

Green Mountain benefits from both Starbucks and Dunkin' Brands
Keurig Green Mountain (NASDAQ:GMCR) (formerly known as Green Mountain Coffee Roasters) benefits from every K-cup pod it sells and the company counts both Starbucks and Dunkin Brands as key partners.

On March 14, Keurig Green Mountain and Starbucks reworked the terms of their five-year agreement and Starbucks will receive improved business terms in exchange for giving up the exclusivity agreement which covers the term "super-premium" coffee.

Starbucks has come out a winner in this case as it leads in K-cups with sales of 2 billion packs since it entered the space in 2013.

Keurig Green Mountain may have opened up the door to competition in the higher-end premium segment (i.e the K-cups with higher average selling points) which doesn't necessarily mean good news for Dunkin Brands. Currently, Dunkin Brands only sells its K-cups at its own shops and the cups don't occupy any space in the grocery aisle.  However, the company does sell bagged ground coffee, such as its Bakery Series coffee, which includes flavors like blueberry muffin and chocolate doughnut.

Keurig Green Mountain's prospects for the foreseeable future remain healthy. For starters, the company's announcement that its new Keurig 2.0 platform will not be compatible with unlicensed portion packs should help the company form new relationships with partners instead of competing against them.

One such example is its recently announced partnership with Peet's Coffee & Tea.  Peet's began selling unlicensed coffee pods nearly a year ago, and it is new partnerships like this that will prevent un-licensed brands from taking market share.  

Bottom line
Starbucks is the king of coffee and it has done a great job of diversifying itself with other product offerings to maintain its growth. Dunkin' Brands has ambitious growth plans as well but investors may find Starbucks' portfolio more attractive with its multiple businesses and international exposure.

Keurig Green Mountain will win regardless of which company wins the Starbucks versus Dunkin' Brands battle so long as consumers continue to enjoy freshly brewed cups of coffee from Keurig machines at their homes or offices.

So what's the Fool's favorite stock?
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Jayson Derrick has no position in any stocks mentioned. The Motley Fool recommends Keurig Green Mountain and Starbucks. The Motley Fool owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers