Dunkin' Donuts Downgrade Could Have Been Caused By McCafe's Recent Success

McDonald’s recent success with McCafe’s $2 menu items may be the reason why Dunkin’ Donuts was recently downgraded by a financial firm from a price target of $55.00 to $52.00.

According to “Business Insider,” Jeremy Scott, a Mizuho analyst, published a report explaining why the Dunkin’ brand was downgraded.

“We expect [McCafe] coffee products will be featured prominently in each pricing layer of its upcoming national value plan,” Scott’s report read, according to “Business Insider.”

The upcoming national value plan would be replacing the “dollar menu” the company retired in 2014. This new plan will include items priced between the $1 and $3 price points, in hopes to attract bargain shoppers.

The popular burger chain announced in September the addition of new espresso-based beverages to its McCafe menu, including flavors and styles like: caramel macchiato, vanilla cappuccino and americano.

Despite some push back from franchisees who complained about the time-consuming coffee drinks, it looks like the McCafe initiatives are starting to pay off already.

A “Business Insider” article quotes “sales at stores open in the US for at least one year rose 4.1%, marking the chain’s third consecutive quarter of increasing sales,” as reported by McD's executives.

The brand hopes to use McCafe, their new value plan, and additional quality improvements to staple menu items to catapult the brand forward.

When there is a brand like McDonald’s that can afford to compete with the likes of Starbucks and Dunkin’ Donuts at significantly lower price points, competitors should be concerned.

Yes, profit will be thin at first, but the business will have the opportunity to gain new loyal customers.

At the end of the day, loyalty helps grow businesses... propelling them into success in the long-run.

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