Hess Hits 'Sweet Spot' With Dunkin'

Published in CSP Daily News

Largest franchisee finds power brand is "natural fit"

By  Erik J. Martin, CSP Correspondent

WOODBRIDGE, N.J. -- A convenience store retailer could do worse than to offer one of the top three coffee brands in the country. And ask Hess Corp. executives why they chose to offer Dunkin' products in its retail operations and you'll get a simple answer: brand power.

"We sold Mountaintop brand coffee for 13 years, and it performed really well for us, but it was still only getting us typical c-store type numbers per day," said Rick Lawlor, vice president of retail marketing for Hess Corp., Woodbridge, N.J.

"After reviewing sales, we explored the idea of creating a proprietary [coffee] brand. We felt like we needed to jump-start our program, and the only way to do that quickly was to develop with a brand that had instant credibility, a brand committed to operational excellence that was innovating itself every day," he said.

Hess, the owner of 1,357 Hess Express and WilcoHess c-stores in 16 states across the East Coast, began adding Dunkin' Donuts to select locations five years ago. Today, Hess is the largest Dunkin' Donuts franchisee, operating 657 Dunkin'-equipped c-stores, 532 of which it also owns (the remaining 125 Hess stores lease out space to outside Dunkin' franchisee owners). Originally, Hess tested two distinct pay points: one for Dunkin' and one for c-store sales, which seemed to aggravate customers and create unwanted in-store congestion. Today, there's one checkout point for all customers.

The Dunkin' portion of each store operates in a self-serve format, offering approximately 75% of the full Dunkin' menu--meaning sandwiches, Coolattas and other niche items are off the list. That's because most Hess c-stores also house Quiznos Sandwich and Godfather's Pizza entities that offer competing food products.

"Godfather's is known more as a Midwestern brand, and Quiznos is a great sandwich brand not as well known to all of our customers, but Dunkin is a national brand known for launching innovative new products. They also do a great job of brand advertising, so they really do a lot as a package to drive people to our stores," Lawlor told CSP Daily News. Lawlor declined to divulge financial data but noted that coffee sales have substantially increased in its stores since adding the Dunkin' Donuts brand.

Lawlor said Hess also picked Dunkin' over its competitors because it hit a "sweet spot."

"Starbucks is a great company with a great product, but they tend to be viewed as more high-end," said Lawlor. "Dunkin' offers a more natural fit with our c-store customer--the middle America coffee and donut consumer. (Providing Dunkin' Donuts) has broadened our customer base."

Founded in 1950 and based in Canton, Mass., Dunkin' Donuts has more than 7,300 stores in 38 states.

"Our strategic plan calls for extensive growth as we grow the business from over 7,000 Dunkin' Donuts U.S. shops today to approximately 15,000 restaurants in the next 20 years," Michelle King, director, global public relations for Dunkin Brands Group Inc., told CSP Daily News.

For more on Dunkin' Donuts' growth plans, watch for the June issue of CSP magazine.