Dunkin’ Donuts Arrives in South Africa to Challenge Krispy Kreme

  • U.S.-owned sweet-goods seller opens first store in Cape Town
  • Dunkin’ plans to have 290 South African outlets in 10 years

South Africans wanting hot glazed doughnuts with a gulp of coffee can now choose between two U.S. brands -- Dunkin’ Donuts and Krispy Kreme.

Dunkin’ Brands Group Inc. opened its first outlet in Cape Town on Thursday, the first of five scheduled to start in the coastal city by the end of 2016. That’s according to Alan Keet, chief executive officer of South African leisure company Grand Parade Investments Ltd., which will run the stores as a franchisee. Dunkin’ intends to open in Johannesburg in the first half of 2017, where the company will compete directly with rival Krispy Kreme Doughnuts Inc., which already has a presence in the country’s most populous city.

“When we go to any particular area we want to go with a bit of a bang and not just open one remote store,” Keet said in a phone interview. Drawing on the experience of operating Burger King restaurants in South Africa, Grand Parade plans to open clusters of stores to make the new brand more visible, he said. Dunkin’, based in Canton, Massachusetts, wants to have 290 stores in South Africa in 10 years, Keet said, and Grand Parade has the rights to expand the brand into six more countries in the region.

Dunkin’ follows other U.S. chains such as Yum! Brands Inc.’s Pizza Hut and Starbucks Corp., in entering South Africa in the past two years, seeking to tap consumer demand for popular U.S. fast-food brands. Krispy Kreme, which opened its first Johannesburg store in November to lengthy queues, has five South African outlets. Grand Parade also plans to open the country’s first Baskin-Robbins ice-cream store, another Dunkin’ brand.

Spreading Awareness

Challenges for the company include making South Africans aware that it sells more than just doughnuts, according to Keet. Grand Parade needs to “make people understand, despite the name, it’s a coffee and bakery offering,” he said. The coffee is imported and a medium-sized cappuccino costs 26 rand ($1.81), while six doughnuts cost 70 rand.

Krispy Kreme’s South African franchisee Fournews Ltd. didn’t immediately respond to requests for comment on the company’s performance in South Africa to date.

Grand Parade has hedged against the fluctuations of the rand, Keet said, without specifying the forward cover rate. That means that “for the first 12 months whatever the rand does is not going to impact us at all,” he said. The South African currency on Tuesday weakened against the U.S. dollar by the most since June after Finance Minister Pravin Gordhan was summoned to appear in court on fraud charges. The currency has strengthened about 8 percent this year.

Dunkin’ Brands shares have climbed 21 percent this year and declined 0.7 percent to $51 as of 9:40 a.m. in New York, valuing the company at $4.7 billion. Grand Parade fell 0.3 percent by 3:40 p.m. in Johannesburg. Krispy Kreme is closely held.

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