By KEVIN HELLIKER
After a retreat from Russia in 1999, Dunkin’ Donuts is returning Wednesday with the first of 20 planned store openings in Moscow this year.
The move by the Dunkin’ Brands Inc. unit will intensify a battle among coffee-shop chains in Russia, a tea-steeped culture that is fast getting hooked on coffee. Restaurant sales of coffee in Russia surged to an estimated $575 million in 2009 from $13 million in 1999, according to Euromonitor International. During the five years ended in 2008, total revenue in the category increased 362%.
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Dunkin’ Donuts intends to open 20 stores in Moscow this year.
Dunkin’ is hoping to match the success of rival Starbucks Corp. of Seattle. Less than three years after opening its first store in Russia, Starbucks boasts 31 locations whose sales make it the third-largest coffee-shop chain in the country, behind an operation called Coffee House and the market leader, Shokoladnitsa, Euromonitor International says. In fourth place is McDonald’s Corp.’s McCafé unit, according to Euromonitor.
The planned store openings come 11 years after Dunkin’ Donuts pulled out of Russia, following three years of losses exacerbated by a rogue franchisee who sold liquor and meat pies alongside coffee and crullers.
This time, Dunkin’ has teamed with Konstantin Petrov, a Russian real-estate developer with a proven record for finding and exploiting retail opportunities, said Nigel Travis, chief executive of Dunkin’ Brands, which is based in Canton, Mass., and owned by a consortium of private-equity companies.
Mr. Travis himself developed the Russian market for Papa John’s International Inc. before taking the helm of Dunkin’ in early 2009. “There’s a growing middle class in Russia, a strong movement toward American brands and a relative lack of competition,” Mr. Travis said during an interview.
But do Russians like doughnuts? That question would be less relevant in the U.S., where coffee accounts for about 60% of Dunkin’ sales. But in Russia, Mr. Travis expects beverage sales initially to account for less than 30% of the total, largely because in international markets, Dunkin’ serves fewer customers in the morning than in the afternoon.
Doughnuts are a dish largely unknown to Russians. “The doughnut? Russians either don’t know what it is or think it is too sweet,” says Ivan Pentchoukov, a native Russian who opened a New York grocery and bakery called Moscow on the Hudson after immigrating a decade ago.
Mr. Travis says Dunkin’ has studied local tastes and concocted several items expressly to appeal to Russians. “Without giving away too much, we’ve found that they favor something called scalded cream and a very nice raspberry jam as a pastry filling,” he says.
Dunkin’ Brands already ranks as a dessert purveyor in Russia. Its Baskin-Robbins ice-cream chain boasts 143 shops there, making it the No. 2 Western restaurant brand by number of stores behind hamburger chain McDonald’s Corp., Dunkin’ says. Its Baskin-Robbins partner in Russia is unrelated to its new Dunkin’ Donuts partner in Russia, Mr. Travis says.
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