Dairy Queen entering crowded coffee market

Dairy Queen hopes to compete with the kings of coffee through a new line of cold, caffeinated products.



This week, the Edina-based restaurant chain rolled out coffee products, including iced coffee, mochas and frappés, at its 4,500 locations in an attempt to lure millennial customers and their coffee cash away from big-name competitors.



This is Dairy Queen’s first stab at the coffee market and it faces steep competition. Starbucks and Dunkin’ Donuts dominate the coffee shop scene, collectively accounting for about two-thirds of the market share, while McDonald’s has been working for years to capture the price-sensitive and convenience-minded customers.



“Our target for this is millennial moms. Here are people who are unbelievably time-crunched, but still looking for a pick-me-up,” said Barry Westrum, executive vice president of marketing.



Dairy Queen’s new coffee beverages quietly appeared on its franchise menu boards across the U.S. on May 15. But the company has a massive — and expensive — national television campaign scheduled for next week. Dairy Queen commercials featuring the new coffee beverages will air next week during the season opener of “The Bachelorette,” the “Dancing With the Stars” season finale and “Shark Tank.”



“It is the biggest spend we’ve ever put against beverages in our history,” Westrum said.



The company hopes its big bet is backed by its flavor and price.



“While the coffee market is really saturated, we saw an opening,” Westrum said. “We will always win on taste. … Compared to the ubiquitous products that are out there, these flavors are really outstanding. They did extremely well in our test markets.”



Dairy Queen also is adding what it calls its “hardest working happy hour,” offering small iced coffees for $1 and small blended frappés or Orange Julius fruit smoothies for $2 weekdays between 2 and 5 p.m. The recommended sale price of those same products during regular business hours range from $1.79 to $3.19 for a small.



Restaurant sales historically struggle during the midafternoon time period. In Dairy Queen’s coffee product test markets of Sioux Falls, S.D., and South Bend, Ind., “we found we could drive incremental sales and transactions” through these products during that “underutilized time,” Westrum said.


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