March 1, 2010 / 8:49 PM / 8 years ago

Coffee price wars not yet hurting Dunkin Donuts

NEW YORK (Reuters) - The fast-food coffee wars have yet to dent Dunkin Donuts’ bottom line very much, one of the chain’s owners said on Monday.

Despite efforts by McDonald’s Corp (MCD.N) to undercut competitors on price, Dunkin’s market share in coffee is steady and growing, Mark Nunnelly, managing director at Bain Capital, said at the Reuters Private Equity and Hedge Funds Summit in New York.

“The big hurt has not been Dunkin to McDonald’s or McDonald’s to Dunkin,” Nunnelly said. “It’s been Dunkin and McDonald’s to your local fill-in-the-blank convenience store.”

Nunnelly, whose firm is one of three private equity owners of the doughnut chain, said Starbucks Corp (SBUX.O) has been hurt the most by the price war and the weak economy.

“The higher-priced players at $4 or $5 for a latte have obviously had the toughest year through the crisis,” he said. “The more accessible price point players like Dunkin and McDonald’s have fared better through that period.”

More consumers are trading down from expensive drinks to cheaper plain coffee rather than switching among the various outlets, he said.

    “If you look at Dunkin’s comps in coffee and McDonald’s comps in coffee, I think you would say you’ve got a pretty loyal set of customers both places, that the price points aren’t different enough,” he said.

    McDonald’s has said strong sales of its McCafe line of coffee drinks were in part responsible for a surprise 1 percent increase in same-store sales in December. January U.S. same-store sales declined 0.7 percent, however.

    Dunkin Donuts is a unit of Dunkin’ Brands Inc, which is owned by Bain Capital, Carlyle Group CYL.UL and Thomas H. Lee Partners THL.UL

    Reporting by Aaron Pressman, editing by John Wallace

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