Mideast could help drive Dunkin' to $29

Saudi Arabia, Bahrain, Qatar, U.A.E and Kuwait are all high-income economies, and some are growing faster than those of BRIC countries.

By Trefis Dec 21, 2011 8:48AM
Pink/SuperStockBaskin-Robbins's strong international presence in strategically key locations could bolster Dunkin' Brands (DNKN) stock to $29. In addition to BRIC economies, the company is also expanding in the Middle East as its operations in this region have made significant gains of late.

A disappointing domestic performance by Baskin-Robbins is also prompting the company to look eastward for growth. There are about 4,000 Baskin-Robbins outlets internationally and revenues from this segment grew more than 10% year over year last quarter. Dunkin Brands competes with McDonald's (MCD), Starbucks (SBUX), Krispy Kreme, Dairy Queen and Cold Stone Creamery to name a few.


The rising Middle East

Like most major food and beverage companies, Dunkin' Brands has vast presence in the emerging economies of Brazil, Russia, India and China as rising disposable income and adoption of western lifestyle offer tremendous opportunity to grow. Moreover, as those markets are underpenetrated, they offer huge potential for expansion. The growth prospects of BRIC nations, however, often overshadow the importance of another major market for Baskin-Robbin, which is The Middle East.


The Middle East's perennial hot climate ensures year-round demand for ice cream and dessert. The company has presence in Saudi Arabia, Bahrain, Qatar, U.A.E and Kuwait. All of those countries are high-income economies, some of which are growing at rates faster than those for BRIC countries. Qatar grew at a jaw-dropping 20% last year, while Bahrain grew at 7%. Dunkin' Donuts opened its first cafe-style restaurant in the Middle East back in 2009, and the premium menu offerings fetch higher margins.


Given the strong growth prospects, Dunkin' Donuts plans to open 25 outlets in the Middle East by next year.


Dunkin Brands Baskin Robbins Intl Total Number of Outlets

We believe Baskin-Robbins' international segment contributes 27% to the Trefis price estimate for DNKN stock. We estimate the number of outlets will increase from the current 4,000 to about 5,000 by 2014. The company also opened its first store in Singapore earlier this year. Apart from the U.S., Baskin-Robbins also has wide presence in Japan, South Korea, Thailand, the U.K. and Canada.


We estimate a $29 price for Dunkin' Brands, which is more than 16% above the market price.

60Comments
Dec 21, 2011 5:35PM
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Boston born and raised, living in California.

Am I reading this right? Dunkin Donuts, who refused to sell me a franchise because they said they weren't interested in the southern California market, have stores in Brazil, Russia, China, India, and now the Middle East?

WTF, Dunkin Donuts!

I still say screw Starbucks, support your local coffee shops.

Dec 21, 2011 12:57PM
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How about you get one in SAN DIEGO before going to the freaking Middle East?!
Dec 21, 2011 6:55PM
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I agree with poconolady01: I wish Dunkin' Donuts would consider expanding right here in the US before looking externally to the Middle East, or any other foreign location.  I live in San Francisco (am from the East Coast, though), and would love it if a Dunkin' Donuts opened out here.  As far as I know, they're not in California at all.  And apart from the gourmet (and grossly overpriced) upstarts (such as Dynamo Donuts, in the Mission), the competition out here (Happy Donut, Bob's, various family-owned & run donut shops) doesn't quite cut it.  And I'm not a big fan of Krispy Kreme, either.  You'd think that westward expansion within the US would be an obvious goal, right?  I guess not.  If you're reading this, Dunkin' Donuts, come to the West Coast, PLEASE!!!  We need you!!!
Dec 21, 2011 2:09PM
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How about putting them in western states first?    Reno can use one!

 

Dec 21, 2011 12:53PM
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That's how we'll conquer the world. Give 'em all heart disease, diabetes, and morbod obesity...just we've done in America. Common Ahmed, have another Dunkin' and an EKG.
Dec 21, 2011 3:57PM
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Middle East!!! How about from Alabama to the west. There are very few D/D stores there. Screw the Middle East. Keep them here where they are wanted.
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I would just be happy if they opened one west of the Missouri river. Don't have one in Nebraska so we have to drive all the way to St. Joe Missouri to get our Donut fix!
Dec 21, 2011 3:07PM
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Sure this sounds like a great business move, but being as we don't even have any DD out here in the Texas panhandle(closest is Dallas area), I wish they would expand to some other places here in the U.S. FIRST! I miss my DD!!!
Dec 21, 2011 6:56PM
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Are you kiddin' me?  Here in Colorado, the nearest DD is 90 miles away.  Krispy Kreme's is closer.  Why not focus here & help the US economy?  You don't see the Middle Easterners racing over here to help*us* out, do ya?
Dec 21, 2011 12:25PM
Dec 21, 2011 4:56PM
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I used to be a huge fan of D&D when I lived in Michigan. I moved to California for several years, then moved to D.C. and found the quality to vary widely by store. It seems that they relaxed their standards, allowing the owners to make their doughnuts however they seemed fit. Even the color of their chocolate filling would vary from light brown to dark.

 

D&D used to have strict freshness standards too, but I would often get a doughnut that was stale and dried out in D.C.

 

I read an article around that time that suggested finding new owners was becoming more difficut for them. I suspect the feared upsetting the few people still willing to open a store by pushing them too much. It's a shame, since I think Dunkin' Donuts was one of the last great national brands still left. Now it's a crap shoot.

 

I wish they'd open one in Reno, but only if they insist on high standards. 

Dec 21, 2011 2:24PM
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I think they should move west... to California.  We are stuck with their coupons in our mailbox and ads on our tv.

Dec 21, 2011 8:00PM
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I'm shocked to read through these posts to find that DD does NOT have as much a presence in the rest of the US.  Freely admit it's ignorance on my part, just assumed that DD were a national brand and that they had stores...well....nationally.  With all the other things to worry about I never would have imagined for a mintue that they weren't present at all in many states nationally.

 

Here where I live in NY/NJ there's one every few blocks or so. Geez I have two within a few minutes of me, one to the left and one to the right.  I'm not kidding in the tri-state area and much of New Jersey too, there are soooooooo many it's not funny.  God you guys living on the west coast must hate us here in NY/NJ and I can't blame ya because there seems to be no rhyme or reason to any of it.

 

I'm actually ashamed that there's not one in the entire state of CA.  How could that be?  Some gentlemen on here said he wanted to open up one in CA but they denied him.  Why?   Isn't it good business that people want to buy from them and open up stores?  Who are they to say "we don't want stores in this state or that state?"  You go to them and say "I want to own one of your franchises" what do they care exactly where you choose to open one?  That part I'm a little foggy about, seems like discrimination to me. Is it really up to them to specify where you can and can't  open up a store of your own?

 

I'm glad that I read through most of these, now I know if I ever move from NY what I'm in for. Dunkin Donuts is not what it used to be but it's still the best coffee around. The Donuts themselves are nothing special but I like their flatbreads etc.  For the life of me I just don't understand aside from NY & NJ and much of the east coast why they're so scarce everywhere else in the US.  Seems to me if you're interested in owning & opening one then you should be allowed to.....wherever you like. Just saying.

Dec 21, 2011 3:46PM
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Dunkin Donuts was in the small town in S. Cal that I grew up in but they finally went out of business when nobody behind the counter could speak english.
Dec 21, 2011 6:48PM
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It's a damn shame they are no longer on the freaking WEST coast. YOU CAN NOT FIND ONE DAMN STORE IN LOS ANGELES. Oh there were a bunch at one point now there are Zilch. Why not come back and give us a try again?

 

I am so sure a lot of people would love having them back VS those DAMN Yumm Yumm Donuts shops (YUCK!)

 

Why complain I think the east coast has it made having them around.

Dec 21, 2011 1:40PM
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Smile Finally a Dunkin will be available to myself and my boss when we are on business trips globally.Starbucks is way too overpriced for something as simple as a cup of coffee. And it boosts the stock value. Having been raised on Dunkin' Donuts in DD's home state as children a real treat was to sit at the counter and have a Hot Chocolate with whipped cream and a donut with Dad. And on the weekend he would pick up a box on Dunkin Donuts to bring home. Plus my Dunkin' shares are going to rise.
Dec 21, 2011 12:21PM
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Junk food to the middle east? Is this part of the covert war we've heard so much about? Will people in the CIA be made to answer in congressional hearings why they sent empty calories to the Saudi's? I'm sure this will divide congress along party lines.
Dec 21, 2011 6:15PM
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Here in Chicago the price of a single Dunkin Doughnut bagel in a bag varies as much as .59 and when I called to complain the DD Regional office explained they had no control of what retailers charged. Even the coffee strength varies widely across their franchises. The corporate folks are now selling a name only. What was a reliable product has just become nothing more then a name sake. What a shame they can allow their local retailers to destroy such a strong brand. They have lost a 20 year customer who began his DD experience back on the East Coast many years ago.
Dec 21, 2011 1:41PM
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Krispy Kreme donuts are way, way, way too sweet.  Dunkin Donuts are too sweet, but they aren't nearly as sweet as Krispy Kreme.  My favorite donuts are from a local shop.  If I had to buy my donuts from a national chain it would be from Dunkin Donuts.  Krispy Kreme would be dead last.
Dec 21, 2011 1:31PM
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Judex,

"Dunkin Donuts discriminates against Jews. "

Do you have evidence to support this claim?  It seems to me that there are many Jews that see discrimination everywhere.  So you should probably support your outrageous claim with facts.
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