Dunkin' Donuts expands sales of packaged coffee

Starting this month, packaged Dunkin' Donuts coffee will be sold by the likes of Wal-Mart wmt, Kroger kr and CVS cvs in a bid to get customers to brew the brand at home, not just pick it up at Dunkin' outlets.

For Dunkin', the retail distribution deal with Procter & Gamble pg is about more than just getting existing restaurant customers to buy the packaged version while grocery shopping. It's about introducing the New England-bred brand to new customers in the West and South where Dunkin' is expanding, with plans to triple U.S. stores to 15,000 by 2020.

To support that growth, Dunkin' and P&G say they've lined up 40,000 grocery and other retail stores nationwide to launch their packaged coffee.

Although some industry experts say the market for packaged coffee sipped at home isn't as robust as it is for java sold at restaurants and kiosks, Dunkin' and P&G believe there's plenty of demand.

"If you're going to be accessible, you have to be in both places," Robert Rodriguez, Dunkin's brand president, said in an interview. "If our numbers are correct, this is the logical extension for us and our brand."

Canton, Mass.-based Dunkin' Brands and Cincinnati-based P&G planned to announce details of their packaged coffee roll-out Monday after initially disclosing their joint venture in February.

The deal pairs Dunkin', a 57-year-old chain with 5,400 U.S. stores and 1,800 overseas locations, with P&G, the world's largest consumer products company. Some of its products include Folgers and Millstone coffee — already mainstays in grocery aisles — as well as Pampers diapers and Tide detergent.

P&G will roast the Dunkin's packaged coffee according to Dunkin's specifications and be responsible for distribution as well as a national marketing campaign based on the coffee shop chain's current "American runs on Dunkin" theme.

"For P&G, it gives them an entry into a premium coffee brand with a company that has a lot of loyalists," said Malcolm Knapp, president of the New York-based restaurant industry consulting company Malcolm M. Knapp. "Dunkin' Donuts gets P&G's distribution expertise and a new source of income — more than they would have on their own."

Dunkin' packaged coffee sales begin this week in selected stores, and will expand more broadly next month. The stores will carry at least five Dunkin' ground coffee varieties, with Dunkin's original medium-roast blend also available in whole beans. Twelve-ounce packages will be offered at a suggested price of $7.99, with 40-ounce bags going for about $16 each in retail warehouse clubs.

In addition to many small retailers, big-box retailers that will sell the coffee include Wal-Mart Stores, Target tgt, Costco Wholesale cost and BJ's Wholesale Club bj. Also on board are drug chains CVS Caremark, Rite Aid rad and Walgreen wag.

But most of the retailers are supermarkets. The list includes Kroger, Pathmark Stores ptmk, Albertson's abs, Shop-Rite, Stop & Shop, Giant Brands and Safeway swy.

It's not the first time packaged Dunkin' coffee has been sold in retail stores. The chain first opened Dunkin' outlets within grocery stores in 2002 and now has about 200 such locations, mostly in the brand's Northeast stronghold.

Meanwhile, Dunkin' came under new ownership by a consortium of private equity firms last year and has been moving into U.S. markets in the Midwest, West and South as part of a strategy to challenge its more upscale rival, Starbucks sbux, which has long offered packaged coffee for retail sales.

The packaged coffee roll-out is intended in part to familiarize customers in new territory to the brand and support sales in Dunkin' stores.

"You're using the store product to reinforce the brand before the stores get there," Knapp said. "More often than not, it's the other way around."

Robert Goldin, of the Chicago-based restaurant and retail consulting firm Technomic, said Dunkin' and P&G will be competing in a packaged coffee retail market that has recently seen slower growth than restaurant coffee sales and shows no signs of catching up.

"Away from home is where the action is with respect to coffee," Goldin said.

While sales of packaged premium coffees such as Dunkin's varieties are growing, the "vast majority" of packaged coffee sales continues to come from traditional ground roast coffee such as Folgers and Maxwell House, Goldin said.

But Jamie Egasti, president of P&G's coffee and snacks division, thinks there's plenty of room for market growth.

"The specialty, or gourmet, side of the business is growing rapidly," Egasti said. "While Folgers has share leadership in the mainstream coffee business, this partnership with Dunkin' is an opportunity to expand into the gourmet side."