KRISPY KREME’S LIMITED TIME DOUGHNUT STRATEGY
Though one might assume that ‘donut’ is the American version of ‘doughnut’, the latter spelling is favoured by Krispy Kreme Inc, the US company which has been synonymous with doughnuts since 1937 but only went public in 2021.
Three years earlier, Krispy Kreme arrived in Ireland at Blanchardstown shopping centre amid much fanfare. Another store followed in Swords Pavilions and a kiosk at Dundrum Town Centre, while earlier this year a city centre outlet opened at Central Plaza, the site of the former Central Bank on Dame Street.
Globally, Krispy Kreme has over 10,000 ‘points of access’. These revolve around what the company calls ‘Hot Light Theater Shops’, the large hub premises where the doughnuts are made and sold. These shops also serve as local production facilities for ‘Fresh Shops’, which are smaller doughnut shops and kiosks without manufacturing capabilities.
Krispy Kreme’s third route is market is ‘Delivered Fresh Daily’ doughnut cabinets within grocery and convenience locations. Again, the promise is fresh doughnuts delivered daily to c.8,500 cabinets. The final sales channel is e-commerce, which accounted for 17% of the company’s $1.4bn turnover in 2021. Besides
the doughnuts, Krispy Kreme also markets a cookie range called Insomnia, and Sweet Treat, a range of packaged sweet treats.
Though the hub and spoke system is well developed in the US and Canada, it’s a work in progress in Ireland. Prior to 2016, the Krispy Kreme operating model was focused on retail and wholesale channels, including discounted long shelf-life doughnuts, and franchisee-controlled shops. The new strategy majors on fresh product – what the company calls ‘limited time offerings’ – which is where the hub and spoke model comes in.
On a P&L basis, Krispy Kreme has been consistently loss-making in recent years, as the company invests in its limited time offerings strategy. However, net cash from operating activities was $140m last year. From the IPO price of $17 in July 2021, the share price has drifted lower to the $12 level recently, where the market cap is $2bn.