Dunkin' Donuts, Coca-Cola Team Up on Bottled Coffee Drinks

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Credit: Susana Gonzalez/Bloomberg
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Dunkin' Donuts has linked up with Coca-Cola to introduce a line of Dunkin' Donuts branded ready-to-drink coffee beverages in early 2017 and plans to give franchisees a cut of the profits from products sold outside the chain's shops.

Coca-Cola Co. will manufacture, distribute and sell the drinks, Dunkin' Donuts, a division of Dunkin' Brands Group Inc., said Thursday (which happens to be National Coffee Day).

Dunkin' Donuts' decision to jump into the bottled ready-to-drink coffee business comes more than two decades after rival Starbucks linked up with Coca-Cola rival PepsiCo to sell bottled coffee drinks.

The products will be Dunkin's first foray into the ready-to-drink coffee category, a market that represents $2.3 billion dollars in annual sales, according to Nielsen data cited by Dunkin'.

Dunkin' Donuts already licenses its brand name to J.M. Smucker Co. for packaged coffee.

Starbucks and PepsiCo set up their North American Coffee Partnership joint venture in 1994, began selling Starbucks Frappuccino drinks in 1996 and expanded the lineup from there. The North American Coffee Partnership held about a 97% share of the ready-to-drink coffee market last year, according to July 2015 statement from those two brands.

The Dunkin' Donuts drinks will be available in refrigerator cases in U.S. grocery stores, convenience stores, mass merchandisers and inside Dunkin' Donuts restaurants. Dunkin' Donuts, which is largely franchised, said it would equally share with qualified U.S. franchisees the net profits it receives from selling the ready-to-drink coffee through outlets outside of its restaurants.

"This new product introduction will increase consumption of Dunkin' Donuts coffee and increase our brand relevance with existing and new consumers, including many younger customers, which we believe will in turn, drive incremental visits to our restaurants," Dunkin' Brands Chairman and CEO Nigel Travis said in a statement.

"Our research has clearly shown that ready-to-drink coffee consumption is a separate occasion from the purchase of our restaurant-brewed iced coffee," Mr. Travis continued. "That same research also shows that having a ready-to-drink coffee product builds brand loyalty. We strongly believe that this product launch is good for customers and for our franchisees."

Coca-Cola's bottling partners will sell and distribute the Dunkin' Donuts beverages, Dunkin' Donuts said. Financial terms of the deal were not disclosed.

Since 2012, Dunkin' Donuts has partnered with Coca-Cola to serve the beverage giant's products including soft drinks, juices, enhanced waters and energy drinks at Dunkin' shops in the U.S. and certain international markets.