Dunkin’ Donuts Hopes Lebron James Will Help Spur Asian Sales

DNKN: Dunkin' Brands Group logo
Dunkin' Brands Group

After announcing its plans to launch Dunkin’ Donuts stores in India by June 2012, Dunkin’ Brands Group, Inc. (NASDAQ:DNKN) has signed a multi-year, multi-million dollar deal with Lebron James to promote coffee and ice cream in Asia. Dunkin’ Brands owns Dunkin’ Donuts as well as Baskin-Robbins. [1] The company competes with McDonald’s (NYSE:MCD), Starbucks (NASDAQ:SBUX), Krispy Kreme, Dairy Queen and Cold Stone Creamery to name a few. We estimate a $29 price for Dunkin’ Brands, which is in line with the market price.

See our full analysis of Dunkin’ Brands here

What Dunkin’ Needs to Address ?

The company chose Lebron since basketball enjoys huge popularity in Asian countries, especially China. Dunkin’ Brands has close to one thirds of its global stores in Asia. Moreover, the company plans to open another 250-300 in the region in the next two to three years.

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The international segment contributes 30% to the total stock price as per our estimates.

Although Baskin-Robbins has been performing impressively internationally, Dunkin’ Donuts’ international segment’s contribution to the overall stock price remains subdued primarily due to its low Average Revenue per Outlet (ARO). The ARO for an international outlet is roughly one-fourth that of its value in the U.S.

Meanwhile, the company is also focusing on building a menu catered to the tastes of local population. Dunkin’ Donuts will soon be introducing shredded pork donuts, something unheard of in the west. Moreover, the company has also been testing other savory products and introducing them country by country. ((Dunkin’ aims at China with pork donuts, LeBron James, reuters.com, March 5, 2012)) With the deal with Lebron, the company will hopefully be able to attract more footfalls which can push up the ARO.

Understand How a Company’s Products Impact its Stock Price at Trefis

  1. NBA superstar Lebron James to promote Dunkin’ Donuts, Baskin-Robbins in Asia, washingtonpost.com, March 5, 2012 []