Dunkin' Brands Is Getting Hit by Soaring Dairy and Vanilla Costs

• April 26 2018
• Leslie Patton

Ice-cream commodity costs have gotten so high, Baskin-Robbins’ parent company has launched a task force to get to the bottom of it, according to Dunkin’ Brands Group Inc.’s chief Nigel Travis.

Ice-cream commodity costs have gotten so high, Baskin-Robbins’ parent company has launched a task force to get to the bottom of it, according to Dunkin’ Brands Group Inc.’s chief Nigel Travis.

Higher ingredient costs are hurting net margins for ice cream, with dairy and vanilla prices in particular weighing down returns, Travis said Thursday in an interview after the company reported first-quarter results.

“It puts pressure on both our margins internationally, and the costs to our franchisees, so we’ve taken this very seriously,” said Travis, who serves as chairman and chief executive officer. “We’ve got a task force working on it.”

So far, the company has been negotiating lower prices on pecans and cocoa to help make up for the surge in vanilla costs, and it’s testing other ice-cream flavors, too, to reduce how much vanilla it needs, Travis said. Bad weather in Madagascar, the world’s biggest vanilla producer, has recently hurt the crop there.

Baskin-Robbins is pushing delivery service and adding drive-thru locations to boost ice cream sales in the U.S. The 7,900-store chain also has a strong presence outside its U.S. home market in Asia and the Middle East.

— With assistance by Lydia Mulvany