Wednesday, November 23, 2005

The Low-End Theory.

Average Joe

New York is suddenly brimming with Dunkin’ Donuts stores. And with a Starbucks on every corner, a coffee class war is brewing.

By Stephen Rodrick

I’ve reported stories on Colombian narco-terrorists, deposed heavyweight boxing champs, quixotic presidential candidates, and the stray multiplatinum-selling boy band. None had a posse like the white-collar army sent by the nice folks from Dunkin’ Donuts.

And it seemed like such a simple idea. Recently, I had noticed that new Dunkin’ Donuts shops seemed to be spontaneously materializing on every other block in New York. A little research confirmed it: Dunkin’ Donuts—whose previous claim to local fame was an epic episode of bad publicity in the form of 1998 New York Post photos of mice nibbling on doughnuts in a Dunkin’ window—has increased the number of its stores in the metropolitan area from 600 to 1,200 since 2002 and plans to open another 100 stores by next summer, bringing the total to 1,300 (by comparison, there are 237 Gap stores in the metro area). So I placed a call to Dunkin’s Canton, Massachusetts, headquarters with the hope of getting a flack to discuss its plans for New York coffee hegemony. After three months of negotiations and a dozen phone calls, I was instructed to be at the Dunkin’ Donuts at 40th Street and Second Avenue on a Monday morning in October. Imagine my surprise when I was met by not one, not two, but eight Dunkin’ employees. There was the flack, the outside-agency flack, three executives, the franchise owner, his son, and someone to drive the trail vehicle. Soon, I was deluged by a shower of business cards, fair-trade beans, and Coffee Coolattas. Over the course of the day, I would be shuttled to four stores, a building site, and a proposed location that I could see only if I swore on a box of Munchkins not to divulge its address. Oh, and as an afterthought, I was shown where they make the doughnuts.

All of which suggests how seriously Dunkin’ is taking its New York invasion. But then, it has good reason to. Food-industry experts estimate that New Yorkers spend more than half a billion annually on retail coffee consumption. Yes, the word is billion.

There was a time, not so long ago, when coffee in New York was just coffee. You drank it black with two sugars served in a blue Greek-diner cup. It was in your hand on the Penn Station platform when the Daily News screamed FORD TO CITY: DROP DEAD. You watched it go cold in your Upper West Side breakfast nook after the ’87 stock-market crash left you praying that your daughter wasn’t too attached to the pool in Southampton. And you drank it by the thermosful, with a splash from the flask, on frozen Sundays at the Meadowlands with your dad. Back then, coffee was just part of your New York life. It kept you functioning the morning after a late night, whether you were soothing a crabby baby or entertaining an insatiable Lower East Side ingenue.

Then came Starbucks. Suddenly, coffee was fetish elixir rather than morning fuel. Like wine, there were things to be learned: Ethiopian varietals, French presses, espresso macchiatos, and something called a Venti. This coffee was strong, too—quaffing a Grande or three a day marked you as a card-carrying member of the overachieving class. With its velvet couches, pleasantly bland mix CDs, and Wi-Fi, Starbucks became a living room away from home for the Norah Jones set and a mobile office for would-be screenwriters. No longer did you pick up a cup of joe on your way to work. Now you ordered a $4.81 skim-no-whip mocha Valencia and spent the afternoon hammering out the chase scene for your future Oscar-winning Miramax project in the public library–slash–pickup joint of the new century. The baristas gave you another reason to stick around. The guys were damp-haired brooding-musician types. The women, shopgirls before Steve Martin coined the term—shy, geeky-hot chicks who knew how to foam your 2 percent milk just the way you liked it.

But this is New York. Like cocktail culture, cigars, and trucker hats before, the prissification of coffee is subject to backlash. No one is saying that $5 java is liable to disappear anytime soon, but perhaps the Age of Starbucks has reached its peak. Maybe coffee isn’t something to be fetishized in a Rob Walker “Consumed” column in the Sunday Times, after all. Maybe New Yorkers are yearning for a simpler time when they got their coffee, got the hell out of there, and got on with their lives. Maybe, just maybe, coffee can be just coffee. Or at least that’s what my eight new best friends from Dunkin’ Donuts are hoping.

The name Dunkin’ Donuts is something of a misnomer. Coffee makes up 63 percent of the company’s $4.4 billion in annual revenue. And while Dunkin’ won’t say how much its coffee is marked up, industry experts say java carries by far the highest profit margin of any Dunkin’ product, perhaps as much as 95 percent (a $2 cup might cost Dunkin’ just ten cents). Dunkin’s fortunes, in other words, rise and fall not on the strength of its eponymous glazed, powdered, or chocolate-covered confections but on how much joe it can pour. All you have to do is look at its current ad campaign. The slogan, “Bring Yourself Back,” is meant to lure on-the-way-to-work-coffee customers into the store for a second cup of java mid-morning, or maybe an iced coffee in the afternoon. The message is simply this: Get your ass back here and drink more coffee.

Okay, about that coffee. The cup before me at the 40th Street and Second Avenue Dunkin’, the first stop on my official tour, is carefully brewed to land somewhere on the java-quality spectrum between Starbucks and deli swill (and it’s priced accordingly: A medium cup of black coffee costs about $1.99 at Starbucks, $1.60 at Dunkin’ Donuts, and $1 at your average deli). The beans and brewing methods Dunkin’ uses yield a product that is neither too strong and bitter (Starbucks) nor too watery and weak (deli joe). Although the mildness of Dunkin’s coffee may offend aficionados (a friend who gets $90 haircuts and wears $400 glasses said, “I bought their unground beans once. They were the color and consistency of dried shit and tasted like they’d been in the warehouse for twenty years”), its wide appeal to others was codified in 2004 when Consumer Reports named Dunkin’s ground coffee the best in all the land. (Of course, this is sorta like Italian Vogue telling you the Ford F-150 is the world’s most reliable pickup truck.)

Unlike Starbucks, whose mermaid-logoed paper cups scream “I am a person with some design sense and an environmentally raised consciousness,” Dunkin’ serves its coffee in Styrofoam containers emblazoned with the company’s cheerful puffy-fonted pink-and-orange trademark. Viewed through an upmarket lens, Dunkin’s cups suggest landfills and Gymboree classes. “They’re fine in the car up to New Hampshire,” an Upper East Side publicist told me, “but not so much on Madison and 52nd.” From a populist perspective, however, the cups signify something simple and happy. “They remind me,” said a friend from a town outside of Boston, “of my suburban youth.”

At Starbucks, your coffee is lovingly prepared by that eager, bright-eyed barista, cup by custom-made cup. At the second Dunkin’ stop, a pencil-thin store at 43rd and Second, the Dunkin’ Eight watched approvingly as a nameless staffer took three orders in a minute, hitting a red button for two sugars and a green one for a dash of milk. Customers came and went as if on an invisible conveyor belt. “See how quickly we move them through?” said one of the Dunkin’ ocho. “In and out, in and out.”

What I was witnessing, of course, is the McDonaldization of coffee. Following the model of the Golden Arches, Dunkin’ prizes speed and sameness above all else (Dunkin’ is owned by Pernod Ricard, a French conglomerate, but its stores are all franchised). In addition to its state-of-the-art push-button standard-coffee machines, each Dunkin’ store has an $8,000 espresso-and-latte machine. The goal is simply for every cup to taste identical, whether you’re in midtown or Park Slope. It may not be the best cup of coffee you’ve ever had, but you can rely on its predictability. And, again copying the McDonald’s model, it will be there instantly. Three years ago, the company hired a consulting firm to go undercover into Boston franchises and study customer flow, food-preparation efficiency, and other issues relating to the time in which customers get in and out of the store. The result was a revamping and enlarging of menus so that the fourth guy in line would have a clearer view, meaning that when he got to the front, he wouldn’t dawdle and slow down everyone’s caffeine fix. The company also hosted a bizarre contest where New England area stores competed in refereed events to see which would be the king of fast service. “I think Dunkin’ dreams of one day being able to read their customers’ minds and tossing them their coffee before they get out of their cars,” says a marketing executive with a decade in the coffee business.

Like McDonald’s, Dunkin’ prizes speed and sameness above all else. Its coffee may not be the best you’ve ever had, but you can rely on its utter predictability.

Dunkin’s focus on efficient coffee is a smart play, according to John Moore, a former longtime Starbucks marketing executive who had a hand in creating the Starbucks coffee-as-lifestyle ethos. “They’re going for the lowest common denominator,” says Moore, who now runs Brand Autopsy, a marketing consulting firm. “And I mean that as a compliment. They strip away the entire pretense, they strip away the culture—the Venti, the Grande—and go for small, medium, large. They’re going for the coffee consumer who doesn’t want to think to drink but wants to get out fast.” At the same time, Dunkin’ is positioning itself above deli mud. “One of the great things about a mom-and-pop outfit is its randomness,” says Moore. “But that’s not what people are looking for in their coffee. Dunkin’ Donuts is always going to be consistent. Its customers may not want to think too much about coffee, but they also don’t want to think, Oh, is this the day I get a bad cup?”

At our third stop, Steve Menexis, the franchise owner, gives me a tour of the pristine kitchen of his 14th Street and Third Avenue store, which also makes the doughnuts for four of his smaller stores. The stainless-steel ovens shimmer like mirrors, and the floors are cleaner than the bathrooms at The Four Seasons. “You should come back at 4 a.m. and see how it works,” says Menexis, referring to the doughnut-making. “It smells great.”

Alleged pleasant smells notwithstanding, Dunkin’s food is spectacularly unsavory. Later, I asked John Gilbert, the company’s vice-president of marketing (and one of the few company executives who didn’t make the trip to New York), why Dunkin’s doughnuts, bagels, and the like were barely mentioned in the current flurry of ads. He hemmed and hawed for a minute before offering, “We get you in with coffee and hope you see something you can’t resist.”

Not bloody likely. Dunkin’ Donuts’ drive to diversify from its carb-crammed, molar-rotting title treats has turned the act of ordering food there into something like tacitly enlisting in the Hemlock Society. Yes, the Boston Kremes and Munchkins, long a staple with the bulimic-undergrad crowd and the guy in your office most likely to have angioplasty, are still popular, but the sugary items I sampled were nothing special unless you live for the jittery, slightly paranoid feeling you get after mainlining a pound of processed sugar. Bagels are also available, but a Dunkin’ bagel is to an H&H bagel what John Stamos is to George Clooney, alike in appearance only. Starbucks’ cellophane-wrapped $6 sandwiches are a crime against commerce and fairness in pricing, but it’s unlikely those products will kill you. I feel fairly confident, on the other hand, that Dunkin’s new steak-egg-and-cheese breakfast sandwich is what the Grim Reaper packs in his lunch box. After purchasing one of the microwaved concoctions, I took it back to a friend’s house, where we dissected it like a bio-lab frog. No matter the poking and prodding, we were unable to determine which yellowish glistening oval was cheese and which one was egg.

As our SUV rolled through Manhattan, various members of the Dunkin’ posse repeated, mantralike, that the company wasn’t in competition with Starbucks. “Our product is unique. We’re running our own race,” said John Dawson, vice-president for development. It was pure corporate spin (don’t dignify the competition with an acknowledgment) but also partially true. Dunkin’ doesn’t need to destroy Starbucks to thrive; it’s more than happy to share the java pie with its froufrou counterparts. In market-speak, Dunkin’ is going after the “non-occasion” coffee drinker. I first heard the term from Gilbert. “Customer segmentation is something we look at,” he told me. “Coffee drinkers have occasion and non-occasion coffee stops. Let’s say there’s a professor on the way to the gym. He pops in for a quick cup of coffee: That’s a Dunkin’ occasion. He might not be able to get in and out of a Starbucks quick enough. Now there might be another time where he has an hour before a meeting and he might end up at a Starbucks.”

At the same time Gilbert subtly jabs Starbucks’ somnambulistic service, he implicitly concedes the fancy-pants java market to Dunkin’s posher competitor. And so does his boss. Last year, Dunkin’ Donuts CEO Jon Luther told Fast Company, “Five years from now, if you’re looking for coffee, there will be only two places you’ll be thinking about: Starbucks and Dunkin’.” The Dunkin’ generalissimo went on to freely admit that his franchises do not attract the precious type of employee needed to compete with the Starbucks barista. “Everybody says it’s about the crew members,” said Luther. “But not only can you not get them to up-sell, you can’t even get them to smile and say thank you! Half the time you’ve got an 18-year-old kid who’s looking at his watch, or an immigrant who’s not speaking the language as well as you want.”

Perhaps not surprisingly after that bout of truth-telling, Luther wasn’t made available for this story.

At about one o’clock, the Group of Eight and I made a stop at a bright and airy Dunkin’ Donuts just off Wall Street. Despite its aesthetically pleasing location and floor-to-ceiling windows, members of the ocho mumbled obscenities and rolled their eyes. Apparently, the promotional posters were not up-to-date. But that’s another story. What was most notable about this location was there were three more within two blocks. That’s the key to Dunkin’s success: saturation marketing.

One of the problems with any no-frills product, whether it’s Southwest Airlines, Supercuts, or Dunkin’ Donuts, is that the product alone isn’t memorable enough to ensure return business. If a customer finds the same product a dime cheaper down the street or if your stores aren’t supremely convenient to get to, he’s gone. “There’s a lack of cachet with Dunkin’ Donuts as it expands into New York and other markets,” says Moore. “It doesn’t have the mystique of a Krispy Kreme or In-and-Out Burger. No one is lining up for an hour to get into a Dunkin’ Donuts. It’s good, but people are not clamoring for it. So it has to be marketed differently.”

Dunkin’ Donuts knows this and has adopted a Chinese Army approach to expansion; what it lacks in sophistication and subtlety, it hopes to make up for in waves and waves of franchises. This explains the company’s decision to double its New York stores. It’s an approach that played a part in Dunkin’s thumping of the cachet-rich but cash-poor Krispy Kreme when the beloved southern glazed-doughnut guys ventured into New England. “We realized if we were to be successful in New York, you had to be able to get the same cup of coffee everywhere and it had to be right in front of you,” says Dawson. “We’d like to have one store for every 6,000 people in New York when we’re done.”

“Dunkin’ is going for the lowest common denominator,” says a coffee-industry expert. “And I mean that as a compliment.”

To accomplish that goal in New York, without forcing franchisers to pay, say, $10,000-a-month in rent for a full-size store, the company decided that its outlets wouldn’t require the spacious and attractive uniform specs of, say, a Starbucks. Dunkin’ Donuts’ stores come in many shapes and sizes, from the cramped quarters in Downtown Brooklyn to a rare Dunkin’ on the Upper East Side with Wi-Fi and outdoor seating. “We have an entire design team dedicated to fitting our Dunkin’ Donuts product into whatever space is available,” says Dawson. “We are flexible. If the space is too small to make doughnuts, we have them brought in from a central oven. We fit in.” All over New York you will find Dunkin’ stores squeezed into building nooks and crannies: a sort of retail spackling.

The brand’s real-estate flexibility presents the company with opportunities that a Starbucks can’t match. The four franchises I visited with the Dunkin’ shock team were all owned by Menexis, but each features a different layout: the Second and 40th location has outside seating, for example, and his store on Christopher Street is tucked neatly among the New York Fetish and Village Pleasures bondage stores. Unlike Starbucks, which tries to locate itself near other posh outposts like Pottery Barn and Barnes & Noble, Dunkin’ is simply looking for pedestrian and car traffic. Late in the day, the Group of Eight and I stopped at a new cubbyholed location under construction at First Avenue and 6th Street on the Lower East Side. The block is a retail wasteland, but Menexis saw nothing but opportunity. “We had to construct a new stairwell here to give us enough storage, and we’ll have to bring the doughnuts in from another location,” he said. He gazed dreamily at the surrounding mid-rises. “But there are thousands of people within blocks here. This is going to be great.” (Unlike 25 Dunkin’ Donuts owners in and out of the city who received $20 million in federal loans meant to help businesses hurt by 9/11, and took a PR hit for it just last week, Menexis has bankrolled all his own stores.) Dawson pointed out a nearby CVS pharmacy and an adjacent McDonald’s. “Those businesses get people out on the street—that’s all we need.”

Dunkin’s goal is for New Yorkers to see a location within every two-to-three-block radius. Its quest for ubiquity is already manifest in the East Village, where, in addition to Menexis’s new store, there are older Dunkin’ outposts at 14th and Third, 13th and First, and 11th and Second.

A little later, we headed up to midtown and a potential Dunkin’ store location I agreed not to disclose. At the top of the escalators at a subway station where six MTA lines meet, there’s a sliver of a future Dunkin’ Donuts. The new store would be on two levels, the upper floor sitting squarely across from the front doors of a 40-story skyscraper. “We’re hoping you get your first cup at your neighborhood Dunkin’,” Dawson said. “Then you hit the lower level on your way into work right off the subway and then hit the upper level for your coffee break. We want to be in a position to offer you your first, second, and third cup of coffee.”

There is a downside to Dunkin’s willingness to sell its coffee in less-than-ideal locations. The majority of the new Dunkin’ Donuts stores are “combos,” sharing counter space with, say, Baskin-Robbins (also owned by Pernod Ricard). The arrangement helps franchise owners make a few more bucks by providing customer flow in the coffee-dead lunchtime hours, and some franchisers say it provides customers with a one-stop-shopping option. Industry observers, on the other hand, say it mainly dilutes the Dunkin’ brand.

The Baskin-Dunkin’ combo isn’t the only bizarre pairing in New York. Many of the New York Dunkin’ Donuts cohabitate with Pizza Huts, Taco Bells, and the occasional Subway (there are also triple combos, like the Dunkin’-Baskin-Subway on Fifth Avenue and 31st Street). My personal favorite is the Dunkin’ Donuts–KFC combo near Grand Central Station. With its pairing of jelly doughnuts and a three-piece Extra Crispy Value Meal with slaw, the location is a gastric disaster waiting to happen.

On my officially sanctioned guided tour with the Dunkin’ boys, all the stops were spacious, airy locales, clearly chosen for their PR suitability. Alas, these turned out to be Dunkin’s Potemkin Villages. Many of the other stores I visited had all the ambience of a Texaco outside El Paso, resplendent with interrogation-quality fluorescent lights and pee on the toilet seats.

Maybe that’s part of Dunkin’s anti-charm charm. A week later, I made an unchaperoned visit to a Dunkin’ store on Chambers Street in the financial district. Okay, it probably wasn’t realistic to expect I could get through a chapter of The Year of Magical Thinking there, but I wasn’t expecting to be seated at a crumb-covered table near a homeless couple bickering between themselves about something, as far as I could ascertain, that happened in 1974. But with all the ranting, I was forced to turn off my iPod and fall into the rococo rhythm of the place. In an hour, cops bitching about A-Rod came and went. A pimp (at least I hope he was a pimp) wearing a yellow-with-black-stripes three-piece suit ordered a large black with one sugar and two creams, got it (quickly, of course), and was gone. Even the two squabblers made peace, with the girl moving next to her dude and announcing to the world, “I love this man.”

Eventually, I left and walked through the fall puddles to a Starbucks across the street. There were the green-aproned antiseptic counter zombies patiently waiting on the button-nosed, apple-cheeked beauties in their new cashmere sweaters sipping nonfat something-or-other with the insouciance of the privileged class. Thinking about the dark-roasted aroma and surgically perfect features, I realized Freddy Ferrer was right. There are two New Yorks: the java leisure class and the rest of us poor schnooks. And that’s when it occurred to me that Dunkin’ Donuts is doing a public service—providing caffeine to the class of New Yorkers that is rapidly disappearing from this BlackBerry-packing, Prada-wearing megalopolis. They’re the sons and daughters of Cheever characters who paid a quarter for an Automat ham sandwich between doorman shifts and seamstress gigs at Macy’s. Dunkin’ Donuts is the rocket fuel for the people who actually do the city’s hard work.

In this, New York’s most recent Gilded Age, perhaps that’s worth fetishizing.

Copyright © 2005 , New York Metro, Llc. All rights reserved.

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