Here’s How Dunkin’ Brands Can Benefit By Expanding Home Delivery For Baskin-Robbins

-1.84%
Downside
106
Market
105
Trefis
DNKN: Dunkin' Brands Group logo
DNKN
Dunkin' Brands Group

Recently, Baskin-Robbins, the ice cream restaurant chain owned by Dunkin’ Brands (NASDAQ:DNKN), announced that it is expanding its home delivery service to more than 600 locations in 22 cities of the U.S., via a partnership with Door Dash. As an increasing number of customers prefer convenient ways of enjoying their favorite foods, the option of door delivery can help Baskin-Robbins to drive sales. Dunkin’ Brands reported disappointing results for Q1 2017, with flat comparable sales for Baskin-Robbins and is looking at innovative ways to grow revenues. The millennial population which accounts for nearly $1.3 trillion in annual consumer spending in the U.S., prefers convenient methods of shopping and this move should help Baskin-Robbins attract this section of the population towards its products.

See full analysis for Dunkin’ Brands

Making The Brand More Accessible To Customers

According to our estimates, the Baskin-Robbins brand accounts for only 11% of Dunkin’ Brands’ valuation and the company derives a significant portion of its revenues from its Dunkin’ Donuts segment. There is scope to grow the Baskin-Robbins brand further and through a home delivery option the company can make it more accessible to customers tapping into the home consumption of ice cream market. According to a market research report published by WiseGuyReports.com, the ice cream market in the U.S. is likely to grow at a compound annual growth rate (CAGR) of 2.09% between 2016 and 2020, with the take-home market segment being the leader with a nearly 65% share. (2015). This indicates that home consumption of ice cream is on the rise and with a door delivery option Dunkin’ Brands can capture this trend. Further, several customers purchase ice cream on impulse and a convenient option to execute the transaction can help Dunkin’ Brands grow revenues.

Relevant Articles
  1. Is Dunkin’ Brands’ Stock Overvalued?
  2. 20% Upside For BJ’s Restaurants’ Stock When Pandemic Subsides?
  3. Can Dunkin’ Brands Survive A Covid Recession?
  4. Donuts Over Burgers: Why Dunkin’ Brands Stock Looks More Attractive Than McDonald’s
  5. Dunkin’ Brands Stock Looks Undervalued At $58
  6. Dunkin’ Brands To Meet Consensus Estimates For FY 2019?

According to our estimates, the average revenue per outlet of Baskin-Robbins U.S. is likely to increase from $ 247,000 in 2017 to $ 265,000 by the end of our forecast period.

However, this segment accounts for only 5% of Dunkin’ Brands valuation and a higher growth in these revenues would not impact our price estimate materially. Although, in the long term, if the company is able to increase its market share significantly in the ice cream segment this brand can contribute more towards Dunkin’s valuation. The restaurant industry is working on several initiatives to provide a superior customer experience which includes digital initiatives to serve customers faster. Convenience is one of the key traffic drivers and several restaurants including McDonald’s are providing home delivery services to attract the millennial population. We believe Dunkin’ Brands’ door delivery initiative should help the company to tap into the growing trend of home consumption of ice cream and drive revenues in the long term.

 

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research