Dunkin' Donuts Takes on Starbucks with New Drinks

By Nichola Groom

NEW YORK (Reuters) - Dunkin' Donuts is looking to undercut the world's largest coffee shop chain -- Starbucks Corp. -- with a line of lower-priced coffee drinks for U.S. consumers that could brew up a war of the lattes.

The doughnut chain, a unit of British spirits group Allied Domecq Plc, says an espresso drinks line was introduced in the New York area this week and will hit the Mid-Atlantic and Philadelphia markets in the next month.

The company said it would soon have cappuccinos and lattes in its more than 4,000 U.S. stores to compete with about 5,500 U.S. Starbucks shops across the country. Starbucks is the largest coffee chain in the world with 7,500 stores.

Dunkin' Donuts chief executive John Luther said the chain is confident it will be able to leverage the popularity of its brewed coffee to capitalize on the appeal of specialty drinks.

And to attract customers, the chain says it plans to keep prices roughly 20 percent lower than competitors and sizes simple and straight forward -- small, medium and large -- to take on Starbucks' tall, grande and venti drink sizes.

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