Dunkin' Brands' K-Cup packs to be sold online and at retail stores

(Reuters) - Dunkin' Brands Group Inc said on Thursday that its Dunkin' K-Cups will be available online and across retail stores in North America, a move that expands the doughnut chain's brand in the single-serve coffee market amid growing competition.

Dunkin' K-Cups are available at present only in Dunkin' Donuts restaurants in the United States. Later this year, through an agreement with J M Smucker Co and Keurig Green Mountain Inc , consumers will be able to buy the product in grocery stores, drugstores and private warehouse stores, as well as on the Dunkin', Smucker and Keurig websites.

Dunkin' Brands Chief Executive Nigel Travis said that most K-cup sales are made where consumers buy their groceries.

The deal removes the challenge of "us not being in the places where all the competition is situated," he said in an interview. He added that it also places Dunkin' K-Cups in regions where Dunkin' Donuts lacks a significant presence, such as west of the Mississippi River.

The move comes at a time when Dunkin', one of the most popular coffee brands in the grocery store, faces increased competition. Kraft Foods Group Inc is launching McDonald's Corp's McCafe brand ground, whole-bean and single-serve coffees at retail. That brand is performing well so far, said Stifel Nicolaus analyst Chris Growe.

Keurig will continue to be exclusive producer of Dunkin' K-Cups. Under the agreement, Smucker will market K-Cup packs to grocery chains, mass merchandisers, club stores, drugstores, dollar stores and home improvement stores. Keurig will market the Dunkin' K-Cup packs to specialty stores and office superstores.

Financial terms of the agreement were not disclosed.

Dunkin' Brands also said it had reached a profit sharing agreement under which certain franchisees would receive an equal share of profit from the sale of K-Cups and packaged coffee outside its restaurants.

Smucker currently makes and distributes Dunkin' Donuts brand bagged coffee. While the launch of the Dunkin' K-cups at retail is expected to help Smucker amid weak sales in its K-cup business, "we believe the margin on these products will be dilutive to Smucker's existing K-cup and coffee margins" due to the profit sharing agreement, Growe said.

Dunkin' has not specified a retail price for the K-Cups but said they are currently sold in its shops for a suggested retail price of $8.99 a box.

Shares of Dunkin' Brands were up 3.6 percent at $48.12 in afternoon.

(Reporting by Lisa Bartlein in Los Angeles and Anjali Athavaley in New York; Additional reporting by Yashaswini Swamynathan in Bengaluru; editing by Savio D'Souza and Matthew Lewis)

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