Krispy kreme doughtnuts (kkd)

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KRISPY KREME CASE ANALYSIS

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Krispy kreme doughtnuts (kkd)

  1. 1. Group Member Wajahat Ali Mudassar Iqbal Ata Makhdoom Muhammad Qaswar TanveerAhmad
  2. 2. 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
  3. 3.  Situational Analysis Swot Analysis IFE,EFE,CPM and BCG Problem Found in Situational and Environmental Analysis Conclusion Recommendation References
  4. 4. 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.
  5. 5. 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)..
  6. 6. 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 .
  7. 7. 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
  8. 8. Vision and Mission Our Vision To be the global leader in doughnuts and complementary products, while creating magic moments worldwide.
  9. 9. 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 customers experience through: Innovative ideas Highest quality, and Caring service
  10. 10. 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
  11. 11. Key Factors Customers Supplies Whole seller
  12. 12. 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
  13. 13. Business OperationsWe generate revenues from three distinct sources. Company Stores. On-premises sales.  Off-premises sales. Franchise. KK Supply Chain.  Mix manufacturing.  Equipment.  Distribution.
  14. 14. 4 WAYS TO RAISE FUNDS Traditional Doughnut Sales Certificates Partnership Cards Coffee
  15. 15. Krispy Kreme U.S.
  16. 16. Krispy Kreme Worldwide
  17. 17. 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.
  18. 18. 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).
  19. 19. 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.
  20. 20. Social Responsibility Gave away free donuts during 2008 Election if you voted
  21. 21. 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
  22. 22. 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 subsidiarydunkindonuts.com
  23. 23. (in thousands) 2003 2004 2005 2006 2007Industry Revenue $120,873,894 $127,892,600 $134,200,000 $142,745,100 $150,100,000Industry Profits $3,626,217 $3,197,315 $3,623,400 $4,710,588 $5,403,600Industry Profit 3.0% 2.5% 2.7% 3.3% 3.6%MarginDunkin’ Donuts $3,200,000 $3,616,000 $3,800,000 $5,000,000 $5,220,000RevenueDunkin’ Donuts $277,360 $289,600 $311,600 $440,000 $475,020ProfitsDunkin’ Donuts 8.7% 8.0% 8.2% 8.8% 9.1%Profit Margin dunkindonuts.com
  24. 24. Gourmet Coffee sales, 2008
  25. 25. 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
  26. 26. Tim Hortons Tim Hortons was founded in 1964 Quick service industry – Coffee and baked goods 3204 locations throughout Canada and the United States
  27. 27. 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)
  28. 28. Situational Analysis Environment The Organization The Marketing Strategy
  29. 29.  Environmental analysisInternal 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
  30. 30. 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”
  31. 31. 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.
  32. 32. Marketing Strategies (cont) Vertical integration supply chain. Short-shelf life products. Failure to do appropriate and effective market research
  33. 33. S.W.O.T AnalysisStrengths 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
  34. 34. 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.
  35. 35. 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
  36. 36. 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
  37. 37.  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.
  38. 38. 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
  39. 39. 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
  40. 40. 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
  41. 41. I.F.E
  42. 42. E.F.E
  43. 43. C.P.M
  44. 44. (BCG)
  45. 45. 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.
  46. 46.  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
  47. 47. 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.
  48. 48.  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.
  49. 49. RecommendationsReduce 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
  50. 50. 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
  51. 51. 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.
  52. 52. 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 developmentStrengthen Competitive Advantage Strengthen Competitive Advantage through differentiation in products and services. Continue to utilize “hot doughnuts now” Expand product line
  53. 53. 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

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