Dunkin' taking on Starbucks by adding espresso to its menu

First, Dunkin' dropped the "Donuts" from its name. Now it's adding espresso drinks to its menu.

Dunkin' says U.S. customers will be able to buy lattes, cappuccinos and other espresso-based hot and cold drinks at most of its 9,200 U.S. stores by the holiday season.

It's part of an effort by Canton, Massachusetts-based Dunkin' to increase beverage sales — already 60 percent of its revenue — and compete more directly with Starbucks Corp. Both companies reported lower U.S. store traffic in their most recent quarters and are looking for a jolt from new products.

Still, Dunkin' has a long way to go. Starbucks controlled 56 percent of U.S. coffee cafe sales in 2017, while Dunkin's share was 27 percent, according to Technomic, a food industry research company. Starbucks has 14,443 U.S. stores, or nearly 40 percent of all coffee cafes in the U.S.

Pricing is determined by franchisees, but Dunkin' will likely undercut Starbucks. Its recommended price for a 16-ounce hot cappuccino is $3.39; Starbucks charges $3.85 for the same drink. Starbucks also charges more for regular brewed coffee.

Starbucks' response, so far, has been to move even further upmarket. It has opened high-end roasteries featuring rare coffees and drinks — like a whiskey barrel-aged cold brew — in Seattle, Milan and Shanghai, and will open one in New York soon. It also recently opened Princi artisanal bakeries in Seattle and Chicago.

Dunkin's effort is focused on the U.S. for now. Most of its international markets already offer espresso drinks, a spokesman said.

Dunkin' said earlier this year it was investing $100 million to modernize its U.S. stores, including adding digital ordering kiosks. The company now says more than half that total is being used to buy espresso equipment.

It's also investing in employee training and even special orange cups to distinguish espresso drinks from its other beverages.

"Espresso is one of the fastest growing coffee categories, particularly among younger consumers, and with our coffee credentials we believe we have a tremendous opportunity to improve our awareness and credibility among espresso drinkers," Dunkin's Chief Marketing Officer Tony Weisman said in a company statement.