KRISPY KREME CASE ANALYSIS

2. Group Member
Wajahat Ali
Mudassar Iqbal
Ata Makhdoom
Muhammad Qaswar
TanveerAhmad

3. Contents
 Introduction
 Vision, mission and values
 Key factors
 Ways to raise fund
 Business operation
 Competitors
 Social responsible
 Stores Layout
 Advertisement/Marketing
 Distinguishing aspect
 Company Indicators

4.  Situational Analysis
 Swot Analysis
 IFE,EFE,CPM and BCG
 Problem Found in Situational and Environmental
Analysis
 Conclusion
 Recommendation
 References

6. Introduction
 1937- Vernon Rudolph bought secret yeast recipe from a
French chef in New Orleans
 Expanded from local store to nation wide chain of stores
 Headquartered in Winston Salem, North Carolina
 1940s – Small chain of stores, family owned.
Development of first distribution system.
 1950s – Improving and automating the doughnut
making equipment.
 1960s – Steady growth throughout the Southeast.
Consistent store designs.
 1973 – Founder Vemon Rudolph dies.

7. Introduction (cont)
 1976 – Company sold to Beatrice Foods and growth
slowed.
 1982 – Franchisees bought company back.
 1996 - Expands outside the Southeast region, first store
in New York.
 1999 – Other store in California, national expansion
underway.
 December 2001 – First international store in Canada.
 October 2003 – First store in Europe at England
(London).
.

8. Introduction (cont)
 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.
 As of January 2008, the trans-fat content of all Krispy
Kreme doughnuts was reduced to 0.5 of a gram or less.
 In 2007 company total revenue is $461195 which is
decrease to $31876 in 2008
 And also In 2009 the company revenue decrease to
45335 .

9. Introduction (cont)
 In 2009 yahoo finance published a list of 15 firms that
have a high probability of going bankrupt during the
year. kkd was on the list.
 650 stores worldwide in 18 countries
 93 company owned and 430 franchisees
 4500 full time employees

11. Vision and Mission
Our Vision
 To be the global leader in doughnuts and
complementary products, while creating magic moments
worldwide.

12. Mission statement
 We create the tastes for good times and warm memories
for everyone, everywhere. With our Original Glazed
doughnut as our signature and standard, we will
continually improve our customer's experience through:
 Innovative ideas
 Highest quality, and
 Caring service

13. Our Values
Our Values
 (with acknowledgement to Founder, Vernon Rudolph)
we believe...
 Consumers are our lifeblood, the center of the doughnut
 There is no substitute for quality in our service to
consumers
 We must produce a collaborative team effort that is
unexcelled
 We must cast the best possible image in all that we do
 We must never settle for "second best"; we deliver on
our commitments

14. Key Factors
 Customers
 Supplies
 Whole seller

15. Case Study: Krispy Kreme Doughnuts, Inc.
 Established in 1937.
 Today has more than 290
doughnut stores (company-
owned plus franchised)
throughout the U.S.
 Serves more than 7.5 million
doughnuts every day.
 Strong earnings and consistent
sales growth.
15

16. Business Operations
We generate revenues from three distinct sources.
 Company Stores.
On-premises sales.
 Off-premises sales.
 Franchise.
 KK Supply Chain.
 Mix manufacturing.
 Equipment.
 Distribution.

17. 4 WAYS TO RAISE FUNDS
 Traditional Doughnut Sales
 Certificates
 Partnership Cards
 Coffee

18. Krispy Kreme U.S.

19. Krispy Kreme Worldwide

20. Store Layout/Design
 Freestanding: Most free-standing Krispy Kreme stores are
constructed with a long window between the customer area and the
kitchen, allowing customers to watch the operation of the doughnut-
making machines.
 Smaller Stores: Most of the smaller stores get their donuts from
other locations rather than producing them on-site.
 Atmosphere: Very welcoming,
with bright lighting. Seating is
limited but available. Factory
tends to pull curious customers
inside.

21. Advertisement / Marketing
 Free doughnut strategy – “Hot Now”; free doughnut while waiting
in line.
 TV ad campaign
 Gifts/Accessories – shirts, sweatshirts, hats, boxers, coffee, mugs,
toys.
 Fundraising – helped schools raise over $30 million last year
(selling doughnuts, coffee, certificates, and partnership cards).

22. Distinguishing Aspects
 Store Layout: Factory inside the store where you can watch
how the donuts are made.
 Reputation: Krispy Kreme has always been known as and
has had a reputation of being the best.
 Hot Now: When the Hot Now sign outside the store is lit you
can get hot and fresh original glazed donuts.

23. Social Responsibility
 Gave away free donuts during 2008
Election if you voted

24. Competitors
 Dunkin Donuts- Privately owned
 Starbucks- coffee shop with 8,800 worldwide
locations
◦ Over expanded- downsizing and consolidating
◦ Current products are too expensive for consumers
 Tim Hortons- fast food restaurant in USA and
Canada
◦ Saturated market in Canada with 3,015 stores
◦ Expansion in US faces tough competition

25. Dunkin Donuts
to be themarketingguy.wordpress.com
◦ Claims to be the “world’s largest
coffee and baked goods chain.””
◦ Serving 2.7 million customers per day
◦ 5,769 U.S. locations
◦ 20 countries
 Wholly owned private subsidiary
dunkindonuts.com

26. (in thousands) 2003 2004 2005 2006 2007
Industry Revenue $120,873,894 $127,892,600 $134,200,000 $142,745,100 $150,100,000
Industry Profits $3,626,217 $3,197,315 $3,623,400 $4,710,588 $5,403,600
Industry Profit 3.0% 2.5% 2.7% 3.3% 3.6%
Margin
Dunkin’ Donuts $3,200,000 $3,616,000 $3,800,000 $5,000,000 $5,220,000
Revenue
Dunkin’ Donuts $277,360 $289,600 $311,600 $440,000 $475,020
Profits
Dunkin’ Donuts 8.7% 8.0% 8.2% 8.8% 9.1%
Profit Margin
dunkindonuts.com

27. Gourmet Coffee sales, 2008

28. Starbucks
 World premier roaster and retailer
of specialty coffee
◦ 8812 own stores
◦ 7852 license stores in more than 50 countries
◦ Annual sale $10 million in 2010

29. Tim Hortons
 Tim Hortons was founded in 1964
 Quick service industry – Coffee and
baked goods
 3204 locations throughout Canada and
the United States

30. Company Indicators
 Sells over 20 types of doughnuts. Produces 5 million
doughnuts a day and 1.8 billion a year.
 Profit Margin: 7.67 % (2006)
 Revenue Growth: 35.40 % (2006)
 Earnings Growth: 70.50 % (2006)
 Sales Growth: 35.4% (2006)
 Sales (mil.): $665.6 (2006)
 Net Income (mil): $57.1 (2006)
 Net Income Growth: 70.4 % (2006)
 Total Employees: 6982 (2006)
 Employee Growth: 78.4 % (2006)
 CEO: Scott Livengood, paid $791.00 K (2006)

32. Situational Analysis
 Environment
 The Organization
 The Marketing Strategy

33. 
Environmental analysis
Internal factors  External factors
 Strong brand recognition  Increasing popularity of
and recall coffee shops and bakery
 Wide appeal of signature cafés
glazed doughnuts  Popularity of American
 Vertical integration foods and fashion in
 Development in overseas markets
international markets  Channel expansion
 Strong channel of possibilities (i.e., Internet
distribution pre-ordering)
 Quality of product  Competitors like Dunkin
Donuts and Starbucks
 Expanded assortment of
offerings at KKD stores  Low-carb trend in eating
including beverages preferences

34. Organization Analysis
 Strategy is focused on revenue
 organizational structure
 In 2001, cash flow return on equity investment for
franchises was at 91%,
 In 2003, the company’s business strategy was to add
enough new stores
 strategies do not appear to be capable of maintaining a
competitive advantage
 July 2004 launching an inquiry into the company’s
accounting practices.
 December 2004, they announced still more “accounting
errors”

35. Marketing Strategies
 little evidence of market research.
 Company spent very little on advertising.
 This strategy seems to still work well but would not be
sufficient to generate continuing business
 New stores are opening, close to the older stores within
the same market.
 Their training, facilities management and franchise
management is good strength of kk.

36. Marketing Strategies (cont)
 Vertical integration supply chain.
 Short-shelf life products.
 Failure to do appropriate and effective market research

37. S.W.O.T Analysis
Strengths
 Affordable, high-quality doughnuts with strong visual
appeal and "one-of-a-kind" taste
 Neon "Hot Doughnuts Now" sign encourages people
outside the store to make an impulse purchase
 Market research shows appeal extends to all major
demographic groups including age and income
 Hot shop" stores save money while keeping KKD
customer experience intact

38. Strengths (cont)
 Vertical integration helps ensure high
quality product
 Consistent expansion; now in 16 countries
 Product sold at thousands of
supermarkets, convenience stores, and
retail outlets through U.S.

39. Weaknesses
 Return on equity, assets, and investments all negative in
the trailing twelve months; skill of mgmt. is
questionable
 Shareholders have not received dividends recently, and
are not expected to in near future; stock price in state of
flux
 Closing stores when stores should be opening globally
at steady rate to keep up with competitors' growth
 Management states in recent 10-K that it is struggling
with how to make stores profitable

40. Weaknesses (cont)
 Product line slow to expand with nothing outside "sweet
treats" to draw in health-conscious customers
 Advertising not aggressive enough to appeal to areas
outside southeast of U.S. where most stores are
 Revenues down, net losses in each of past three years

41.  Opportunities
 Development into diversified product markets
 Detection of the problem occurring in the management
of the business and thus the fall in business and
profitability
 Develop the social outreach programs to promote the
doughnuts and to promote the customer based objectives
and mission of the organization
 Reaching the market to really know what the customers
want and then to develop the marketing and strategic
policy in accordance to that.

42. Opportunities (cont)
 Asians love sweets and are open to trying foreign foods
 Starbucks lacks a diversified and distinctive pastry line
 Dunkin' Donuts does not have hot doughnuts to sell
 Many children love sweet treats

43. Threats
 Tough competition and increasing global recognition of
Starbucks and Dunkin Donuts.
 Global presence of the competitors
 More health conscious customer base
 Development of organic markets
 Starbucks has approximately 25 times the amount of
stores worldwide that Krispy Kreme Donut has

44. Threats (cont)
Restricted cash flow from banks and
massive layoffs have stifled the world
economy, decreasing discretionary
income
 Europeans prefer their local brands of
doughnuts
 Shareholders may sell KKD stock for
lack of returns and dividends compared to
other similar firms in the industry

45. I.F.E

46. E.F.E

47. C.P.M

48. (BCG)

49. Problems Found in Situational,
Environmental Analysis
 the lack of a cohesive marketing structure within or a
strategic marketing plan for the organization.
 Flawed or absent marketing research has resulted in
store closings and or expansions that were not backed
up by market data or evidence that this investment
would be feasible.
 The company spent very little on advertising depending
largely on word of mouth, and local publicity.

50.  As a result, Krispy Kreme acquired a company in 2007
that by the end of fiscal year 2008, had lost $25 million
dollars.
 The second problem is using a vertically integrated
supply chain

52. Conclusion
 The food industry has been affected by a recent trend
toward quick eating habits. Krispy Kreme has
capitalized on this trend by positioning doughnuts as a
popular, on-the-go food.
 Krispy Kreme’s success has hinged on consistency
throughout its locations and by delivering a high quality
product.Future growth opportunities include expanding
franchises as well as penetrating alternate distribution
channels.
 As Krispy Kreme analyzes potential growth
opportunities within alternate distribution channels
such as convenience stores and grocery chains, it must
determine whether doing so will sacrifice brand equity
and product quality.

53.  It is believe that Krispy Kreme can be successful in
launching its product in new markets without establishing
physical locations. Alternative channel distribution will
help bring the Krispy Kreme product to millions of
potential customers who have yet to experience the taste
of America’s best doughnut.

54. Recommendations
Reduce operating expenses
Change entire manufacturing and distribution strategy
–Implement par baked manufacturing operation.
 to allow individual stores to decrease in size, thus
lowering per store operating costs to a more appropriate
level for sales volume
 Increased efficiency – smaller workforce per store, par-
bake allows for minimal waste – inventory as needed
(important b/c fresh goods – low shelf life
 Par bake will allow for “hot doughnuts now” all of the
time.
 Implications of transition to par bake operation

55. Recommendation (cont)
 New Plant Equipment – freezers, production equipment,
freezer trucks for distribution/delivery.
 Store Equipment – freezers, oven for various par baked
goods, fryers for doughnuts.
 R&D for unique par bake operation

56. Recommendations (cont)
2- Develop stronger relations and control
of franchisees
 Short-term period of one year – postpone new franchise
agreements/new store openings
 Implement Franchise Support Systems
 Communication – between corporate and franchisees
 Support – training, advertising
 Utilize recommendation #1 in order to lower operating
expenses for franchisees.

57. Implement Marketing Strategies
 Advertising – national television and radio advertising
campaign based on “hot doughnuts now”.
 Marketing research – periodic research to stay abreast of
trends.
 R&D – product development
Strengthen Competitive Advantage
 Strengthen Competitive Advantage through differentiation
in products and services.
 Continue to utilize “hot doughnuts now”
 Expand product line

59. References
 www.krispykreme.com
 en.wikipedia.org/wiki/Krispy_Kreme
 www.krispykreme.co.uk/store-locator/
 www.youtube.com/user/KrispyKremeDoughnuts
 Strategic management 13 edition