Watch Out Starbucks!

This is a partial transcript from "Your World with Neil Cavuto", February 5, 2004, that was edited for clarity.

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NEIL CAVUTO, HOST: Well, they are calling it the espresso revolution. No, I’m not talking about Starbucks. I am talking about Dunkin’ Donuts, whose new line of lattes and cappuccinos cost 20 percent less than Starbucks brand. Should its competition be worried? Let’s ask Jon Luther. He is Dunkin’ Donuts CEO.

Jon, good to have you.

JON LUTHER, DUNKIN’ DONUTS CEO: Thanks, Neil. Thanks for having me.

CAVUTO: So this is slightly cheaper than what Starbucks offers?

LUTHER: Yes. We think we are starting what we hope to call an espresso revolution, which means that you come into our stores and get the same great value you’ve always had at Dunkin’ Donuts, and we can provide it for 20 to 25 percent less. It’s real cappuccino, fresh milk, and we can deliver it in a minute’s time so that the waits are short.

And you know what? We are not confusing. You don’t need a dictionary to order our product. It’s small, medium and large.

CAVUTO: Right. So you’re cheaper, but you argue you are better in terms of the quality.

LUTHER: Right.

CAVUTO: Now, the question for Dunkin’ Donuts has to be -- because you are implementing this new system here -- that it’s going to be consistent in all restaurants.

LUTHER: That’s a great point. We spent almost two years in tests to make sure that the product was consistent. We worked with a Swiss firm and made a piece of equipment. And that equipment is Swiss-precise, and we are able to have our crewmembers make the product consistently each and every time, and deliver in a minute, which is really the key to Dunkin’ Donuts. We are known for our speed of service, and our accessibility and our affordability.

CAVUTO: I was kind of hinting during the break here that I think you are kind of like the Rodney Dangerfields of the fast-food worlds, and I say this in all due respect, that Starbucks gets all this credit for the fancy coffees and lattes and espressos, and the $5 cups and all that.

But you sell a lot of coffee. A lot of people go in to get coffee and doughnuts every day. But it’s like you are an asterisk out there.

LUTHER: Yes. We are sort of the sleepy company that sells just about a billion cups of coffee a year. And we sit around in Boston and say, you know, it is time, maybe, just maybe, for espresso drinks to go mainstream. And you’re right. Nobody does mainstream better than we do.

CAVUTO: This isn’t a wrap against you, Jon, but why did it take so long? Surely, you must have been looking at the Starbucks phenomenon and saying, hey, I want in on that. We’re doing that.

LUTHER: Well, you know, we are the leading provider of coffee by the cup, regular, non-espresso.

CAVUTO: Right.

LUTHER: So that was really our strength.

CAVUTO: But not coffee by the really expensive cup.

LUTHER: Right. Or espresso.

CAVUTO: Right.

LUTHER: And we began paying attention to our consumers and our customers, who were saying, hey, how come you don’t have espresso? So we began responding to respond that about two years ago in tests. And now we’re rolling out here in New York, and will be nationwide by March 1.

CAVUTO: Now obviously you are a thin guy. You’re not eating much of the company product, are you? Or just a fast metabolism?

LUTHER: Well, I’ve only been here a year. Maybe next year when I’m back to talk to you I’ll look a little different.

CAVUTO: I want to see you 30 pounds heavier a year from now. Jon Luther, Dunkin’ Donuts CEO, thank you very much.

LUTHER: Thank you, Neil.

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