Dunkin' Donuts Finds Moving Upscale
Is More Complicated Than Expected

The new Wall Street Journal Weekend Edition has been pretty well parsed to death by critics. It's been called everything from a journalistically watered-down sop to luxury-goods advertisers to the paper's last-gasp attempt to please critics of its longtime lagging stock price with a breakthrough innovation. But I think that eventually, the Journal figures out how to turn everything it touches into great, uniquely illuminating journalism. And it certainly helped itself with a fine, well-reported front page piece in last week's weekend edition (April 8-9). The subject, of all things, was how the Dunkin' Donuts chain is trying to move upscale to capture some of the coffeehouse crowd from Starbucks and maybe also steal some of McDonald's business as well.

The first eye-opening fact was that the chain's new owners are a trio of venture capital groups, including Bain Capital Partners and the Carlyle Group! The latter is the shadowy investment group which leverages its lineup of former world leaders (including Britain's former Prime Minister John Major and First Father George H.W. Bush) into breakthrough investments, especially in the defense and aerospace arena. For those of a certain outlook, this group and its unique connections to power and wealth around the world (especially in Saudi Arabia) has become almost what the infamousTrilateral Commission was to an earlier generation: the source of endless feverish speculation about its potential for global manipulation. For more about the Carlyle Group, click here, here and here.

Anyway, the new owners, not known to be shrinking violets when it comes to multiplying the return on their investments, is trying to lure more upscale customers without pissing off the “tribe” of hard-core Dunkin' regulars. It’s proving to be a tricky balancing act. For once, the non-upscale crowd seems to be determined to stay proudly non-upscale, even when pushed to do so by those who are used to having their way. Since it's online only for subscribers, here's part of the story:

“Dunkin’ plans to unveil the first part of the new strategy Monday (two days ago) with an ad campaign aimed at rebranding the chain as a quick but appealing alternative to specialized coffee shops and fast food chains…While execs insist they are not trying to emulate their Seattle rival, Dunkin’ store makeovers include some similarities to Starbucks. A prototype Dunkin’ store in Euclid, Ohio, outside Cleveland, features rounded granite style coffee bars where workers make espresso drinks face-to-face with customers.” DD now has nearly 5,000 shops and plans to triple that in the next 15 years.

Here's the money quote: “...Dunkin built itself on serving simple fare to working-class customers. Inching upscale without alienating that base has proven trickly. There will be no couches in the new stores. And Dunkin’ renamed a new hot sandwich a “stuffed melt” after customers complained that calling it a ‘panini’ was too fancy.” One member of the tribe was also quoted as saying if he wanted to sit on a couch, he'd stay home.

All in all, it's something of a case study in how psychographic consumer segmentation--something I wrote about last week in the realm of politics (it drew the most comments ever on this site)--is becoming an all-important lens. But I especially like this story, since it's an example of intense (and I hope ultimately successful) pushback against how much of America is being steamrolled into lockstep fealty to the lifestyle whims of the McMansion crowd, or what David Brooks has called the "bobos," for bourgeoise bohemians. Good luck, Dunkin' Donuts tribe.