Case 1 – Krispy Kreme Doughnuts

Strategic and Quality management

Submitted by – Ashish Ranjan Borah
ID – 6039387

PROFILE
FOUNDED: In North Carolina1937
INDUSTRY: Restaurant
HEADQUARTERS: Winston-Salem, North Carolina.
PRODUCTS: Doughnuts (30 kinds), soft drinks (espresso, chillers), hot drinks (coffee)
REVENUE: 510.21 million USD (2006)
362 million USD (2011)
NET INCOME: 88.45million USD (2006)
7.6 million USD (2011)
EMPLOYEES: 4,250, 3,700 (2011)

MISSION:
To touch and enhance lives through the joy that is Krispy Kreme.
VISSION:
To be the worldwide leader in sharing delicious tastes and creating joyful memories.
History/Timeline
• In 1933 Rudolph began selling the yeast doughnuts in Paducah and delivered them on
his bicycle.
• In 1950 expansion took place with introduction of automatic dough cutter.
 • By the 1960s, Krispy Kreme was known throughout the southeastern United States.
• In 1976, Krispy Kreme Doughnut Corporation became a wholly owned subsidiary of
Beatrice Foods of Chicago, Illinois.
• In 2000, KKD was successful in raising significant capital with its Initial Public
Offer.
• In 2003, a pilot project in Mountain View, California, to sell doughnuts through car
windows and sunroofs at a busy intersection (with wireless payment) failed
• In January 2008, the fat content of all Krispy Kreme doughnuts was reduced to 0.5 of
a gram or less.
• In July 2010, Krispy Kreme introduced a doughnut that included the soft drink
Cheerwine, which was to be sold in grocery stores in North and South Carolina.
• In 2004, KKD suffered from losses. The company blamed a diet-conscious public
pursuing the low carbohydrate for its problems. Thus contractions started in 2005.
• in 2006, Darryl Brewester CEO.(left in 2008),Jim Morgan , but the sales were
declining in US.

Company Structure

Krispy Kreme was originally a partnership, but now is a corporation. As a corporation,

Krispy Kreme has limited liability, the ability to obtain finances for expansion, and a
perpetual life. In addition, it has easily changeable ownership, attractiveness to potential
employees, and the ability to obtain finances from outside sources other than management.
An autocratic leadership style is used. Two-thirds of Krispy Kreme stores are franchises. The
franchisees pay up to a $40,000 fee for each store they open and pay royalty fees.

Marketing

Although Krispy Kreme has no mission statement, its actions indicate its strategy is to
differentiate themselves in the retail doughnut/coffee industry based on its experience in
selling quality coffee and doughnuts. In the beginning, Krispy Kreme Doughnuts had the
total product offer. The value package consists of delicious, hot doughnuts that are ready to
buy. Krispy Kreme prides themselves in having speedy service, and ready to sell, hot
doughnuts right off of the oven rack. The image created by all of the free publicity caused
many people to come and experience the “Krispy Kreme Phenomenon.” Stores have a custom
design appeal and some are open twenty-four hours a day making efficient use of all
available time.

• Product Differentiation & Product Line

Krispy Kreme differentiates themselves with signature stores that have a green roof and open
glass windows which allow customers to see doughnuts being made (Thompson et al, 2004).
The facility layout of the stores allows for a unique customer experience, separating Krispy
Kreme from such competitors as Dunkin’ Donuts, Tim Hortons and Winchell’s Donut House.
Krispy Kreme’s product line already consists of over twenty-five different varieties of
doughnuts.

A major push to sell coffee was made in hopes of keeping potential customers from going to
Dunkin’ Donuts. In 2001, Krispy Kreme purchased Digital Java, Inc., in an effort to compete
with other doughnut retailers beverage sales. Krispy Kreme increased its sales by 40%
because it was able to expand its product offering and its quality (Thompson et al, 2004).
Krispy Kreme’s coffee and beverage sales became more profitable but did not produce as
much sales as the competition did in the beverage area. Although, Krispy Kreme has started
selling coffee, its primary focus has always been on selling doughnuts. Nothing was done to
promote the coffee and other beverages, customers were expected to buy them when they saw
they were available and to tell their friends about the new products.

One of Krispy Kreme’s downfalls in recent years is its inability to differentiate themselves
from the product line of Dunkin’ Donuts and other competition. Doughnuts sold to
wholesalers were no longer hot out of the oven and were not any different than any other
doughnut. Krispy Kreme’s failure to separate themselves from what the competitors were
selling caused the consumer to lose interest in the company’s products. Krispy Kreme’s
competitors such as Dunkin’ Donuts and Starbucks have been successful because they are
able to offer not just one product, but a number of things that attract both new and old
customers while still bringing in a steady profit. After the consumer had the “Hot Doughnut”
experience, they were left with nothing to come back for.

Market Share
44

23% 43%

5%

27%

Starbucks – Dunking – Krispy Kreme – Tim Horton - Others

Major Competitors of Krispy Kreme Doughnuts, Inc.
• Panera Bread
• Starbucks
• Dunkin’ Donuts (owned by Allied Domecq)

Environmental Analysis

Internal
•Brand recognition
•Supply chain
•Wide demand
•Vertical integration
•Quality of product
•Machine technology
•Limited product line
External
•Popularity of coffee shops

•Popularity of American foods in foreign markets

•Entertaining opportunities
•Technological advancements
•Channel expansion possibilities
•Competitors
•All-natural, organic, healthy eating trends
S.W.O.T Analysis

Strength

• Affordable, high-quality doughnuts with strong visual appeal and kind taste
• "Hot Doughnuts Now" encourages people outside the store to purchase
• Market research shows demand increases to all group of people of different age and
income
• Vertical integration helps to ensure high quality product
• Expanded in 16 countries
• Product sold at thousands of supermarkets, convenience stores, and retail outlets
through U.S

Weakness

• Advertising and promotion is not much attractive to attract people outside US

• Shareholders have not received dividends and don’t expect in near future due to share
price
• Closing stores are giving chance to competitors to open new stores
• Return on equity, investment and assets are all in negative through out 12 months due
to lack of skilled management
• Revenues decreasing, and continuous net losses in past three years • continued
disputes with franchisees hurt future business

Opportunities

• Asians love sweets and are open to trying foreign foods

• Dunkin' Donuts does not have hot doughnuts to sell
• Many children love sweet treats
• South America, Africa, and Southern Asia are markets to target
• Tim Horton has yet to expand beyond the U.S. and Canada, and its product line does
not appear to be competitive
• Families crave convenience because of busy lifestyles

Threats

• Starbucks has much greater in amount, stores worldwide than Krispy Kreme Donut
• People are much health conscious, and much care about high sugar and high fat
• European mostly prefer their local brands
• Dunkin' Donuts presently dominates the doughnut market, particularly in north-
eastern U.S
• Shareholders can sell their share due to lack of return or dividend compared to their
competitors
• Briton’s tend not to have cars, which discourage the drive thru and their eating habits
are different from Americans.
Strategic Plan

• Play up recognizable brand and logo, longevity, reputation, and especially quality
product
• Settle upon and promote a recognizable company slogan
• Emphasize international market and expand selectively in the U.S.
• Reduce overall grocery store market and concentrate on small stand-alone stores
• Expand fundraising and charity activities
• Tap into new consumer markets, including the “breakfast crowd” and health-
conscious
• Continue to work on website, keeping its eye-catching appeal but increasing ease of
use
• Look for new opportunities in technology to improve advertising, product, and
efficiency
• Consider joining forces with other strong companies
• Adjust to changes in consumer health trends and regulations
• Examine worldwide economies to relate to customers and employees