Dunkin' aims at China with pork donuts, LeBron James

SINGAPORE Mon Mar 5, 2012 7:54am EST

One pound bags of Dunkin' Donuts Original Blend coffee are on display at a Dunkin' Donuts store in Tewksbury, Massachusetts December 20, 2005.  REUTERS/Jessica Rinaldi

One pound bags of Dunkin' Donuts Original Blend coffee are on display at a Dunkin' Donuts store in Tewksbury, Massachusetts December 20, 2005.

Credit: Reuters/Jessica Rinaldi

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SINGAPORE (Reuters) - Pork donuts may not be palatable to Americans or Europeans, but the parent company of Dunkin' Donuts and the Baskin-Robbins ice cream chains is catering to local tastes in China, where it aims to open another 100 stores in the next two to three years.

Dunkin' Brands Group Inc (DNKN.O) also announced a multi-year marketing agreement on Monday with National Basketball Association star LeBron James, who has a big following of Chinese fans. The company now has about 150 stores in China, the world's second-largest economy.

"Donuts are a very flexible product. You can do savory donuts, you can do donuts with shredded pork -- that's in China," Chief Executive Officer Nigel Travis told Reuters in an interview.

"We also have a range of other savory products that we have been testing and introducing country by country."

Getting the menu right in each market is critical. Pork donuts, for example, are not likely to sell well in Indonesia and Malaysia, where people are predominantly Muslim.

In the whole Asia-Pacific region, where Dunkin' Brands has over 5,400 outlets, it looks to open at least 250 net new stores for both its brands by 2015. Net new stores refer to the number of stores that open minus those that close.

Dunkin' Brands, which has a market value of $3.5 billion, competes in Asia with the likes of Krispy Kreme Doughnuts Inc (KKD.N), Starbucks Corp (SBUX.O), McDonald's Corp (MCD.N) and J.CO, an Indonesian donut and coffee chain.

Private equity firms Bain Capital, Carlyle Group and Thomas H. Lee Partners bought Dunkin' Brands from global spirits maker Pernod Ricard SA in 2006 and took the company public in 2011.

Of 15 analysts covering Dunkin' Brands stock, seven have "buy" or "strong buy" ratings, seven have "hold" and one has a "strong sell," according to Thomson Reuters data.

Dunkin' Brands shares closed at $29.02 on Friday and have risen around 16 percent so far this year.

FOCUS ON THE CONSUMER

Dunkin' Brands picked James as its brand ambassador in Asia partly due to the Miami Heat star's huge appeal in China, Travis said.

James will promote Dunkin' Donuts and Baskin-Robbins through advertising, online media and in-store marketing, as well as personal appearances at certain locations.

John Costello, chief global marketing and innovation officer, told Reuters that Dunkin' Brands is also developing milk tea and bagels with pork floss topping to cater to tastes in China.

"While we compete in very competitive markets, I think the key is to focus on the consumer, to understand their needs better than anybody and deliver on that," he said. "We think the best strategy is to execute on brand differentiation."

Travis said the target market tends to be young people with a reasonable level of income who are often "busy and on the run" and live in urban areas.

He also said global commodities prices, which saw heavy volatility last year, are stabilizing partly due to improving weather conditions that could lead to better harvests.

Dunkin' Brands is a huge consumer of commodities like coffee, wheat and dairy products.

"The spike in coffee that we saw last year seems to have subsided," Travis said. "Some other products like wheat have gone up but overall we think this is going to be a much better commodity year than last year."

(Reporting by Eveline Danubrata; Editing by John O'Callaghan)

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