Dunkin' strategy: breakfast and beyond

Java giant Dunkin' Donuts is looking to juice up sales with a new smoothie line.

The Canton-based company is unveiling three new yogurt-and-fruit blended drinks in New England on Monday and nationwide this summer. The launch is Dunkin's biggest initiative since it introduced espressos, lattes, and cappuccinos in September 2003 and part of a strategy to branch out beyond coffee and doughnuts.

''There's a hole in the marketplace for smoothies," said Joe Scafido, Dunkin's chief creative and innovation officer. ''There's not a major chain that currently has smoothies across the country."

Consumers are developing a taste for smoothies, creating $1.2 billion market that has grown about 12 percent a year over the past two years, according to data Dunkin' cites from research firm NPD Group.

Last month Services Acquisition Corp. agreed to buy fruit smoothie chain Jamba Juice for $265 million with plans to expand. But Dunkin' doesn't think the chain is much competition: Jamba has about 542 locations and about $345 million in sales last year, compared with the doughnut king's 6,767 stores and $4.14 billion in sales.

Dunkin' says its smoothies are an opening salvo in an effort to evolve beyond breakfast as it expands. Dunkin' plans to triple its number of US stores in less than 15 years and offer a bigger menu with snacks like Dunkin' Dawgs (hot dogs wrapped in dough) and Meatball Melts sandwiches, which are currently offered at a prototype shop in Pawtucket, R.I.

Dunkin's new approach comes as competitors are intensifying their bids to capture a larger part of the New England coffee market. In February, Starbucks signed an agreement to start serving its coffee inside Stop & Shop grocery stores, and last year McDonald's started serving gourmet coffee at 600 locations in New England.

Scafido says the region's brewing coffee wars haven't yet hurt Dunkin's sales, but they underscore the need to broaden the chain's appeal.

In New England, Dunkin' is hoping to draw customers into the store more frequently with its smoothies -- a combination of yogurt with a hint of vanilla, real fruit concentrate, and crushed ice.

When Dunkin' began its smoothie project a year ago, the company conceived of coffee-flavored yogurt drinks. But poor reviews shifted the attention to fruit -- and lots of it. Developers initially wanted to roll out a pomegranate-flavored smoothie, but there weren't enough pomegranates in the world to supply the chain. So Dunkin' sought out more plentiful fruit and expects to use about 1.7 million pounds of strawberries from now until August.

At $3.39 for a 16-ounce cup, the smoothies cost about $1 more than the Dunkin's Coolatta drinks.

''The challenge is getting customers to think of Dunkin' outside of breakfast," said Dennis Lombardi, executive vice president of food service strategies for design-development firm WD Partners in Columbus, Ohio. ''A lot of people didn't believe Dunkin' could migrate into the more upscale beverage market with the espressos and lattes, but it's very successful. As the company expands into new markets, Dunkin' will probably have an easier time convincing people they're not just about coffee."

A Jamba Juice spokeswoman declined to comment, and a Starbucks spokesman couldn't be reached for comment. But the Seattle company is also expanding its offerings, unveiling a Blackberry Green Tea Frappuccino several weeks ago and a Banana Frappuccino later this summer.

The smoothie is Dunkin's first product launch under new owners, Bain Capital and Thomas H. Lee Partners, two of Boston's largest buyout companies, and the Carlyle Group of Washington, D.C. Earlier this year, the group purchased the chain and sister companies Baskin-Robbins ice cream and Togo's sandwich shop for $2.43 billion.

This isn't the first time Dunkin' has tried to break out of its breakfast-only identity.

In 1998, the company began serving up $3.99 deli sandwiches. But the initiative never really took off, and attempts to put Dunkin' and Togo's under one roof also didn't go well.

Jenn Abelson can be reached at abelson@globe.com.