#64 Donuts for Russia!
As the Wall Street Journal reports, Dunkin Donuts is returning to Russia. After it has retreated from the market in 1999, the owner of the Dunkin’ Donut brand, Dunkin’ Brands, is planning to open 20 stores in Russia this year. At the time when then owner Allied Domecq decided after only three years in the market that Russia would not work for their brand, there were two Dunkin’ Donut stores in Moscow and three outside. The official reason has been Russia’s economic crisis, but there was also talk about difficult relationships with franchisees (in particular one who sold liquor and meat pies in addition to Dunkin’ products). There may have been at least one more reason – at least according to the Wall Street Journal, Russians aren’t really familiar with donut’s. In recognition of this, Dunkin will be experimenting with scalded cream and raspberry fillings. Plus, this time they are bringing in a lot of Russia expertise – Dunkin’ is teaming with a Russian real-estate developer. What’s also noteworthy is that Dunkin’s CEO, Nigel Travis, has developed the Russian market for another US brand in the past, Papa John’s.
November 2, 2010 @ 7:52 pm
Dunkin’ Donuts’ initial attempt to enter the Russian market failed, in my opinion, due to the fact that they did not do their research on consumer preferences of pastries. As stated in the blog, Russian people were not very familiar with donuts. The Russian culture, similar to many European cultures, do not prefer their pastries as sweet as we do here in the US. I believe the international strategy used by Dunkin’ Donuts did not take this into perspective and did not work on changing their recipes to cater to the tastes of the Russian consumers.
It has now been 11 years since Dunkin’ Donuts has retreated from Russia and they are giving it another try. From a USA Today article dated 4/28/2010, Dunkin’ Donuts Chief Operating Officer for international operations, Tony Pavese states that the Russian market has changed since 1999, which gives the company hope for success this time around. Since 1999, Dunkin’ Donuts has started to market coffee and are taking this concept into Russia since witnessing many other companies, such as Starbucks, having entered the Russian market with success. Tony Pavese states, “The market conditions in Russia have changed quite a bit and the propensity for coffee and the amount of consumption of coffee that’s happened over time.” Management at Dunkin’ Donuts are taking a different approach by targeting a younger audience and focusing on making the Dunkin’ Donuts experience a social gathering spot, similar to that of Starbucks. I believe the management of Dunkin’ Donuts is still not doing proper market research. They are relying heavily on a “If they (Starbucks, etc.) can do it, so can we” mentality. What the management of Dunkin’ Donuts is not researching is how their coffee measures up to that of Starbucks and other gourmet coffee shops in Russia. In a taste test, would the Russian people prefer Dunkin’ Donuts coffee over Starbucks, do they like the taste and flavor varieties more. I believe that the management will also experiment with some pastry changes, as well, however it seems like they are putting all their marbles in the bag marked “Coffee” to give them success in Russia.
January 16, 2011 @ 9:21 pm
In my opinion the failure of Dunkin‘ Donuts in Russia as well as in Europe has been caused by cultural differences and preferences. First of all, Donuts are a typically American pastry and not as famous in Europe. Many people don’t even know Donuts and never heard of Dunkin‘ Donuts. Furthermore, Europe has its own traditional pastries, e.g. Bismarck’s, and Donuts do not seem to be accepted as much as those traditional pastries. As already mentioned in the entry above, Russians are not familiar with those pastries and the different fillings. Russia has also a very high Uncertainty Avoidance Index with 95 and therefore it seems to be difficult to introduce them to new and unknown products. The United States, on the contrary, are lower positioned in the UA Index with 46 and may therefore be more attracted to new flavours and variations.
Specific market research is necessary to succeed. Sometimes cultural differences are not taken into account when entering a new market; maybe the companies only think of their current success in one country and believe to be able to transfer this success to any country without creating a proper and customised strategy.
November 22, 2011 @ 3:02 am
This blog post discussed the return of Dunkin Donuts to the Russian market after closing their stores in 2002. One of the primary reasons it seems that Dunkin Donuts proved unsuccessful in 1999 is because of their inability to adapt their marketing efforts and franchise guidelines to the Russian culture. In the United States Dunkin Donuts has been successful because American Culture loves donuts. The Russians were not as familiar with donuts as Americans. Dunkin donuts did not anticipate the rejection and thus they closed. Now that they are returning it seems they have learned to work with professionals in Russia familiar with the culture and who understand the cultures expectations in real estate, food and customer service. It is important for the organization to research whether Russia is an individualistic country and the depth of their health conscious eating and physical appearance importance. Donuts are stigmatized to be extremely unhealthy so experimenting with new recipes and flavors will help if the country is health conscious. All these factors are important when considering entering an international market and it seems Dunkin donuts has finally taken that into consideration with the re-entry into Russia.
January 8, 2013 @ 8:27 pm
Although Starbucks is very successful in Russia, I think it is very hard for US-companies to enter the Russian market. When you take a look at Hofstede’s dimensions, huge differences exist between these two countries:
The dimension ‘Power Distance’ is very high in Russia (93) which means that status symbols are very important to Russians. One reason therefore is the huge discrepancy between the less and the more powerful people. This also has effects on the management; the approach should be top-down and provide clear mandates for any task. The Unites States score low on this dimension (only 40). Status symbols are not that important, more important is to provide liberty and justice for all. The management is not organized hierarchic and communication is informal.
When it comes to ‘Individualism’ the ratio is quite equal but now the United States have a higher Score (91). The US can be seen as a very individualistic culture. The “I” is more important than the “We” which means that people look after themselves and their direct family. The same attitude is expected by managers towards their employees. On the opposite Russia scores only 39. Friends, family and the neighborhood are important and relationships are crucial for their daily life. Management will focus more on the interaction with a person than the person itself.
The smallest gap between these two countries exist in the dimension ‘Masculinity / Femininity’. The United States are a masculine society with a score of 65, which means that competition, achievement and success is important and the goal is to win or to be the best. Americans live to work so that they can earn monetary rewards and attain higher status based on how good one can be. On the contrary Russia (36) focuses on caring for others and the quality of life. Dominate behaviors among peers is not appreciated, it is only accepted if it comes from the boss.
The last dimension is called ‘Uncertainty avoidance’ and expresses the way how a society deals with unknown situations or developments. Russians, with a score of 95, feel very much threatened by ambiguous situations. They have one of the most complex bureaucracies and feel secure when everything is planned in detail. The United States (46) are more willing to accept risk in order to try something new and accept new ideas. Furthermore they do not require a lot of rules.
To face such big cultural differences is very difficult but I think that the most important step has already been done. By teaming up with a Russian partner Dunkin Donuts is reducing its own risk. Furthermore they should consider that it will be hard to convince Russians to test a new product because of the high uncertainty avoidance. Time will show if they will enter successfully with their new created Russian donut fillings or if they have to leave this country one more time..
November 15, 2013 @ 11:34 am
Since this piece of news was posted there are around 24 DD opened in Moscow. However, it is seems that they do not have a great success among the customers even after 99′ retreat.
The first reason of lack success and recognition of Donkin’ Donuts is lack of customer knowledge. Russian consumers are not acquainted with donuts culture and prefer another kind of deserts. In this way, I’d say that Russians are more traditional and conservative with the food. From my point of view, teenagers can be a good target group for DD, but it is not enough to make a good profit.
Unlike in USA, Russian consumers do not buy baking and pastry in the mornings. Majority of population, especially in Moscow prefer to have a lunch in the public places in the afternoon. Many businessmen prefer to visit prestigious restaurants, that can be a sign of high power distance and masculinity in the country/
The others mainly choose the DD’s competitors, such as Shokoladnitsa, Costa Coffee or Coffee House. Furthermore, Russian customers are not aware about the DD’s menu, about the products offered there. They tend to think that they offer only sweet donuts, that is obviously not enough to eat during the launch break.
In contrast to USA, even in Moscow there is no such a big rush, and business people prefer to settle down and discuss important issues with a cup of coffee.
I’ve checked the current situation of DD and found out that nowadays they are mainly targeted at children and teens and organize lots of events in order to promote brand. In my opinion, it is a good strategy to position yourself as a children-friendly store.
Maybe they have the best donuts, but it is not the best desert for Russian people.
June 30, 2017 @ 7:33 pm
The first time when Dunkin Donuts failed in Russia is comparable to the failure of Campbell soups in Russia. Both times an American company tried to enter the Russian market and both companies did not succeed although they made a lot of research in this country. They are very successful in their home country, so why did they fail in Russia? I think this is due to cultural differences between the USA and Russia. Russia is a quite traditional country and the traditional food and recipes are seen as “holy”. It is essential for Russian women to know how to cook and if they do not know they are not seen as real woman. So Russians might have actually known donuts but they would have always preferred their own traditional pastries. It could be said that the Russian market was not ready for Dunkin Donuts in 1999 and they made the right decision to try it a second time when the market was ready. Eleven years after they failed their time has come: the coffee consumption increased and the Russians were more open to Western businesses because Starbucks and Burger King had already successfully entered the Russian market. So Dunkin Donuts entered the market again and this time they made everything right by adapting their products to the local requirements and the people seem to like it because Dunkin Donuts is still operating in Russia.
Sources:
http://www.bakingbusiness.com/news/news%20home/business/2010/4/dunkin%20donuts%20to%20open%20first%20restaurant%20in%20russia.aspx?cck=1
http://www.nbcnews.com/id/36822469/ns/business-world_business/t/dunkin-donuts-returns-russia/#.WVaZa7E_-fA
July 9, 2017 @ 11:17 am
In my opinion, it sounds like Dunkin Donuts did not fail because of an economic crisis, but because of not enough or no suitable market research. The cultural differences to Russia cannot be neglected and might be the reason for different expectations to sweets, their tastes and shops.
Dunkin Donuts needs to consider the cultural dimensions of Hofstede, when adapting the concept in the new market. In order to be successful, Dunkin Donuts has to carry out detailed market research including tasting experiments and focus groups to have the same understanding of the Russians needs and expectations.
December 26, 2021 @ 10:52 pm
I believe Dunkin’ Donuts initially failed in Russia similarly to how Starbucks failed in Australia in the sense that both brands failed to understand they cannot simply enter foreign markets without first understanding them. Similarly to how Starbucks failed to conduct the necessary customer and market research to understand it cannot successfully compete with Australia’s already-established strong coffee culture, Dunkin’ Donuts failed to take into account Russia’s lack of familiarity with donuts or preferences for more traditional pastries. Furthermore, Dunkin’ Donuts also had poor relations and control with its franchisee’s overall quality and consistency as they utilized its stores to promote and sell more familiar items like liquor and meat pies. Since its re-entry into the Russian market in 2010 after its exit eleven years prior due to increases in coffee consumption, Dunkin’ Donuts must first reorient itself to better align with Russia’s culture because Dunkin’ Donuts’ initial implementation of its American culture failed due to key distinctions between its culture and Russia’s culture . If Dunkin’ Donuts can better reflect Russian culture and food preferences by creating and developing a variety of differentiating and quality food products like bakery and creamy items, test these new food items amongst various types of customer focus groups, and target young audiences through social networks and digital advertising in order to build awareness and familiarity, this will potentially increase the popularity of both Dunkin’ Donuts and donuts within Russia over time as the familiarity of both these entities amongst the Russian population will likely increase generation after generation.