Dunkin Brands CEO: K-cups Deal Won't Cannibalize Dunkin' Donuts

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Dunkin Brands Group Inc (NASDAQ: DNKN) announced that it’s partnering with

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Keurig Green Mountain Inc (NASDAQ: GMCR) and J M Smucker Co (NYSE: SJM) to sell its single-serve coffee pods, commonly called K-Cups, at various retail establishments apart from Dunkin’ Donuts

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restaurants. Under the terms of the deal, Dunkin would be sharing 50 percent of the profits earned through the sale of K-cups with its franchisees for the next 20 years. Nigel Travis, Dunkin Brands chairman and CEO, was on

CNBC Thursday to discuss the deal and how it will benefit the company and its franchisees. “This is a great deal for our consumers and for our shareholders, but it’s also a great deal for our franchisees, because we have partnered with our franchisees in a long-term deal to share 50 percent of the revenue with our franchisees, which will of course boost franchisee profitability, which is something we are all about,” Travis said.

' Aren’t You Cannibalizing Your Stores?'

When asked about how the move from physical Dunkin' Donuts stores to wide availability provided by K-cups, Travis explained that he is not concerned.“No, we don’t believe we are,” Travis replied.“And, in fact, one of the reasons we have done this deal: we believe that other people may get something out of it as customers may get used to other taste profiles out there.“A lot of people are there in the coffee space – a lot of other brands. We want Dunkin’ Donuts to come in to grocery stores and other retail outlets and really dominate as we have done in the restaurant space.”

It's A Defensive Move

“So, I think this is actually defensive of our store position, and our franchisees actually employed an independent consultancy and they came out to the same conclusion,” Travis said.