A hot cup of Giuseppe

Espresso to go is latest salvo from Dunkin' Donuts

By James Collins, Globe Correspondent, 9/2/2003

QUINCY -- To make a large cappuccino at a Dunkin' Donuts shop here, Camila Macieira needs just 47 seconds and five simple clicks on a touch-button screen.

By the standards of the coffee industry, that's a mighty quick dose of caffeine. At rival Starbucks Corp., highly trained "baristas" might take twice that time -- and a bit more artistry -- to produce an Espresso Macchiato ("espresso gently marked with foam") or another of its signature espresso-based beverages.

As Dunkin' Donuts expands its product line to include espresso beverages, long the province of Starbucks and other high-end outlets that emphasize ambience and attitude, the Randolph doughnut and coffee chain is banking on speed, efficiency, and lower prices.

Dunkin' Donuts's new process is "lots of preprogrammed button-pushing, and not a whole lot of eyeballing," said Brian Dudley, the Dunkin' Donuts executive in charge of product development. "We can't afford that kind of subjectivity."

The company, a unit of British food and spirits giant Allied Domecq PLC, is pinning its hopes on hundreds of specially modified espresso machines, which it is acquiring from Swiss manufacturer Schaerer AG. While Dunkin' Donuts's foray into espresso is new, the company's interest in coffee is not -- coffee beverages account for over 40 percent of sales.

The category includes, of course, Dunkin' Donuts's signature coffee, served in a white polystyrene cup and immortalized in generations of police films. But another large portion of Dunkin' Donuts's "coffee" sales -- the percentage varies by store -- is its trademark Coffee Coolatta and Dunkaccino beverages. Most everything the chain serves is also available on ice. Other noncoffee beverages, such as milk and water, account for 10 to 15 percent of sales.

The machine behind the latest line of beverages, the Ambiente, retails for about $11,800, but because Dunkin' Donuts needed machines for almost 3,000 stores, Schaerer lowered the price to about $7,800.

"They bought more than any distributor ever has," said Steven Eckenhausen, president of Schaerer USA, the company's US subsidiary based in Long Beach, Calif. "This is a big contract in a niche industry."

Eckenhausen, who also sells a smaller number of the "fully automatic" espresso machines to Starbucks, says the Ambiente was a perfect sell for Dunkin' Donuts: It's fast; the taste is reliable; and it demands a lot less training than the manual machines made famous by Starbucks and other coffee shops. Working with its franchisees, Dunkin' has installed the machines in 600 stores and expects to have the Northeast covered by October, Dudley said.

The machine is automatic in almost every way: Based on the touch-button input of its user, the Ambiente grinds espresso beans automatically; dispenses just the right amount of hot water; and, using a built-in sensor, steams the milk to the "perfect" temperature for a cappuccino or latte, or about 160 degrees Fahrenheit. (A separate touch-button machine, the Sureshot, automatically dispenses the precise amount of milk for each beverage.)

Maciera, 19, must still combine the coffee and the steamed milk, an element of "theater" that Dudley hopes will draw at least some of those seeking the Starbucks ambience.

It may be a tough sell. "I love Dunkin' Donuts, and I go there all the time, but I feel like they should stick to what they're known for, and that's regular coffee," said Michelle Salamy of Chestnut Hill, after ordering a Caramel Macchiato at the Starbucks in Downtown Crossing.

Other Starbucks customers, though, welcomed the competition. "I've always loved Dunkin' Donuts coffee, so I'd definitely drink their cappuccino," said Greg Stone of Boston. "I'm not really into the culture at Starbucks."

The Seattle-based coffee giant, which is quietly installing some automatic machines, is sticking by its baristas.

"We stand behind the quality and handcraftedness of our product as well as our legendary customer service," said Lindsay Ransick, the company's New England marketing manager.

While Starbucks is installing some automatic machines at its "high-volume" stores in and around Boston, most locations will continue to use manual machines manufactured by Italian firm La Marzocco, Ransick said. "Our baristas will still have to do some tasks by hand," she said.

At most Dunkin' Donuts in the Boston area, a large cappuccino sells for $2.82, but each franchisee can specificy his or her own prices independent of the company's recommendations. At Starbucks, whose stores are corporately owned, a comparable cappuccino -- the "Venti" -- costs about $3.40.

Scott Van Winkle, a Boston-based analyst with Adams, Harkness & Hill, predicts that Dunkin' Donuts's latte love affair will be more successful in some markets than it will in others.

"In places like New England, where customers are already in the habit of stopping at Dunkin' Donuts every day, they're likely to keep those habitual customers from going to Starbucks," Van Winkle said. "But I still think at the end of the day, because the employee base at Starbucks is so much better-trained, Starbucks is still going to have the edge on quality of product."

Even if its new, touch-button cappuccino is comparable in quality, Van Winkle said, Dunkin' Donuts is not going to steal away Starbucks diehards. For some, he says, the baristas, the production process, and the extra buck will always be worth it.

"Perception's the key here," he said. "An automated machine may make as good a cup of cappuccino, but it's all about what the customer thinks."

The move doesn't appear to be paying off just yet.

At the Quincy store and seven others in Quincy and Weymouth, espresso beverages have driven just 5 percent of sales since the machines were installed, according to the franchisee owners, Octavio and Victor Carvalho.

The brothers hope that sales will "take off" when Dunkin' Donuts launches an advertising campaign in early October.

Eckenhausen remains optimistic, given the company's previous success in bringing beverage lines to market. Dunkin' Donuts introduced the Coffee Coolatta iced beverage in June 1997 and the Dunkaccino, a powder-based hot beverage that resembles hot chocolate, in November 2000.

"There's been sort of stigma surrounding espresso drinks," he said. "Dunkin's basically proven that it's not just for yuppies. Joe Doughnut is also interested."

Globe correspondent Zachary Bayrouty contributed to this report.