KIEV, Ukraine -- Dunkin’ Donuts is set to hit Ukrainian streets next year, with five stores opening in Kyiv.
The coffee and pastry outlet will then spread to other major cities, such as Odesa, Dnipropetrovsk, Donetsk and maybe Kharkiv, according to Kostyantyn Petrov, the Ukrainian businessman who owns the franchise rights in Ukraine and Russia.
Petrov, 38, who hails from Alchevsk in eastern Ukraine, is banking on breaking new ground with an international big name in a country that hasn’t had many fast-food chains with great success, McDonalds being one of the few exceptions.
He said he’s convinced that Dunkin’ Donuts’ “high quality with a modest price” is going to help it succeed where others have failed.
Australian cafe chain Gloria Jean’s Coffee entered the market in late 2007, eventually opening three spots in Kyiv before closing last year during the economic crisis.
Market insiders say Gloria Jean’s failed for a number of reasons. “The right to operate this kind of global franchise is very expensive by itself, and they oblige their owners to open new spots, which is financially challenging,” said Olha Nasonova, a restaurant business consultant.
It struggled to meet chain development commitments, according to experts. The franchise owner went bankrupt and eventually sold rights to other businessman who has now opened stores in Odesa and Lviv.
Moscow-based Petrov is a wealthy businessman with a number of interests across many sectors, including construction, heavy industry and real estate. He runs 10 restaurants in Ukraine and Russia and an entertainment center.
Petrov said he has an equal partner in the venture, whom he refused to name. “We estimate that opening of one store in Kyiv will cost about $200,000,” said Petrov, noting the need to purchase equipment to make the products, train staff and invest in stores.
Petrov, who also owns the franchise for Russia, opened the first Dunkin’ Donuts store in Moscow in May. He said the company would focus on take-away, or to-go, services and hopes to beat its competitors with targeted marketing and modest prices.
Dunkin’ Donuts, he said, will target the “golden youth” aged from 16 to 30 years and plans to focus its advertising efforts on positioning it as “stylish fast food.”
“We anticipate that in Kyiv an average bill will be $6-7, and I think our price for a donut will be less than a dollar,” he added.
The menu for Dunkin’ Donuts will be adjusted to the tastes of local consumers and include coffee from only fresh-roasted Arabica beans, iced coffee drinks, as well as donuts, salads and sandwiches.
The U.S.-based chain sells more than 1.5 billion cups of coffee annually worldwide and 2.5 million donuts daily in 33 countries. Russia became the 33rd, and next year Ukraine will be the 34th.
The return of Dunkin’ Donuts comes 13 years after McDonald’s, the fast-food king with a more comprehensive menu and loyal customer base, first entered the Ukrainian market.
“All the big names, like Burger King, KFC and Starbucks are constantly watching Ukraine, and are waiting for the right moment,” said Andriy Kryvonis, head of the Franchise Association in Ukraine.
However, research shows that Ukrainian consumers still eat out less than other Europeans. According to Euromonitor, a global consumer market consultancy, the food-service volume of coffee sales in 2009 reached 1,026 tons, while retail sales of coffee accounted for 41,638 tons. “Ukraine has not developed a culture of dining out,” reads Euromonitor’s report.
The consultancy noted an 11 percent drop in food-service sales because of the economic crisis, and predicts a growth of only 1 percent per year over the next five years, against a 26 percent increase in retail.
But Petrov is not deterred. “It’s the tastiest coffee in the world,” he boasted. “Within the next couple of years, we plan to have up to 30 outlets in Kyiv.”
Another coffee trend from the West has also emerged in Kyiv in recent weeks, with street vendors popping up across the capital. Oleksandr Luhovsky and Oleksandr Khadgy, baristas with more than 10 years of experience in the coffee business, set up a coffee machine last month on a street in the center of the city.
“People suspect that if we sell cheap coffee in the street, it’s probably not tasty or high quality,” said Luhovsky, “but we give them a pleasant surprise.”
In took only $5,000 and permission for street trading to set up the stall, offering a cup of espresso at Hr 7, a cappuccino for Hr 11 and a latte for Hr 13.
“Such a coffee spot is very warmly welcomed by foreigners that recognize familiar street vending,” said Khadgy. “Our people tend to be cautious before they try it and then become regular customers.”