Krispy Kreme Strategic Analysis:
Introduction
In 2003 Krispy Kreme was named by Fortune Magazine as “America’s Hottest Brand” and in 2004 they reported net income of $50 million. However over-expansion, an expensive store network, revelations of falsified financial reports and changing trends in diet have meant that Krispy Kreme revenues have declined by 50% between 2005 and 2010
The strategic problem considered is to analyse Krispy Kreme’s current operations and suggest recommendations for how this may be tailored for the UK market for long-term profitability given cultural and retail differences.
Current strategy
Krispy Kreme operates 582 stores (including franchised) in 18 countries worldwide. Stores range from 4,000 to 8,000
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Krispy Kreme train their staff who usually have little experience or education; consequently, they pay employees minimum wage or similar and are therefore affected by minimum wage increases. Other political factors are government actions to reduce obesity; however it is very unlikely that government will legislate against high fat and unhealthy foods
Economic
The continued economic downturn has meant tightened consumer spending, as Krispy Kreme is a non-essential food item this may pressure sales. Inflation is above the Bank of England target and there is upward pressure on long-term interest rates as shown by the UK treasury yield curve. An increase in interest rates will increase the cost of capital and mean more expensive borrowing at a time that they could need to expand to compete with rivals.
Social
UK consumers are becoming more aware about the ingredients in food, e.g. boycotting trans-fats, battery farmed poultry and mass farmed tuna. In 2008 this motivated
Alternative movements, such as eating organic, also become “performative of an elite sensibility” (Guthman 2003, 52), as food is used as a symbol of certain social and environmental values, while the consumption of this food bolsters a sense of heightened moral superiority. Product manufacturers have been particularly astute in rebranding even the most unhealthy of foods, such as sugar, by ‘re-enchanting’ foods, projecting ‘holistic’ notions such as the family farm across their plastic packaging. These “supermarket narratives” play into consumer desires for ‘healthy’ foods by emphasizing ‘freshness’ and ‘sustainability’ (Reisch 2003), ideas which complement the ‘white’ ideology of food. In consuming these ‘healthier’ foods, the white middle class consumer often separates themselves from fast food eaters, who are viewed as mindless fools (Guthman 2003, 55).
He probes them to learn the what, where, and how of dinner – knowing what is going into the body, knowing where that food came from, and knowing how that food was made. By first knowing what is being consumed, people can make better informed decisions about their purchases. Nutrition, or lack thereof, is a key component in the battle against obesity. Food giants are hoping to hide the often unnecessary filler present in their products by use of dodgy claims and socially engineered advertisements. In general, most consumers probably couldn’t say where their food came from. This usually boils down to the fact that shoppers typically don’t think about it. Breaking this reliance on mass-grown foods is the second part of Pollan’s proposition. The third and equally important element is how the food is produced. More specifically, Pollan is concerned whether or not the food has been produced in a sustainable manner. Preserving the biodiversity of food, maintaining fertile land for future generations, and ensuring consumers receive food that does not compromise health are all factors of sustainability. Without informed consumers, what, where, and how will continue to be unanswered questions. Whether it is for nutritional or ethical choices, a particular food’s history is something that needs to once again become common
Founded in 1937 in Winston-Salem, North Carolina, Krispy Kreme is a chief branded retailer and wholesaler of high-quality doughnuts, including its innovative Hot Original Glazed. Vernon Rudolph bought a secret yeast-raised doughnut recipe from a French chef from New Orleans, borrowed a building in Winston-Salem to bake in, and began selling Krispy Kreme doughnuts to the local grocery stores. Krispy Kreme has sustained its intensification and lengthened the design of the reliable Krispy Kreme store throughout the Southeast. They now have about 300 Krispy Kreme factory stores and 90 satellites, and have continued growth.
3-21. Krispy Kreme started as a family business. How has that influenced the operation of the company?
Each of the retail stores is a doughnut factory with the capacity to produce between 4,000 and 10,000 dozen doughnuts daily. Each factory store contains a full doughnut making production line. The factory store is marketed as a unique retail experience, featuring the store’s production process, including a doughnut-making theater. The stores also support multiple sales channels to more fully use production capacity. Stores provide Krispy Kreme doughnuts to be sold in satellite locations, ballparks, and grocery stores, and under private label marketing agreements.
There are over 8,500 Dunkin Donuts restaurants across 41 states in America and over 11,300 worldwide (Dunkin Donuts). With so many locations it was easily accessible and convenient for my schedule. The
Each of the individual components have been previously discussed, but it is interesting to compare them together to see how three of the most important aspects of the business have changed over time. Specifically it is worth noting that Profit Margin has increased significantly every year since 2000. What this means is that Krispy Kreme has gotten better every year at turning each sale dollar into net income.
As at 2013, there were 10,858 Dunkin' Donuts retail locations, including 7,677 in the United States and 3,181 in 33 different countries. Most of Dunkin' Donuts are operating by franchisees and it is a very successful business model that generates much of its revenues. It is continuing to grow more franchisees in the United States and international market. In July 2013, Dunkin' Donuts
After the recovery, KRISPY KREME again decided to expand its operation scale by tripling the stores within five years and marching toward the overseas market.
Krispy Kreme has experienced dramatic growth over the past 5 years based on their income statement. Every line on the income statement has grown rather impressively. Revenues have grown from $220M to $666M and net income has grown from $6M to $57M. Based on the income statement, Krispy Kreme is doing very well.
As Wall Street Journal stated, Krispy Kreme grew too quickly and diluted its cult status by selling its doughnut in too many outlets. They could not anticipate when the demand decreased due to low-carbohydrate diet trend issues. It can be seen clearly that interest expenses also increased for the year ended Feb 2, 2003 to the year ended Feb 1, 2004 as the debt increased.
There are currently 18,875 KFC outlets in 118 countries worldwide and it is the world's second largest fast food restaurant chain. Throughout the years, it has expanded internationally throughout the years.
The company under analysis in this report is Dunkin Donuts. The brand of Dunkin Donuts originated in 1950 when Bill Rosenberg opened the very first outlet in Massachusetts, USA. Today Dunkin' Donuts is the world's leading baked goods and coffee chain, serving more than 3 million customers per day worldwide. It sells about 52 varieties of donuts and more than a dozen coffee beverages as well as an array of bagels, breakfast, sandwiches, subs and other baked goods. Dunkin Donuts is a subsidiary company of Dunkin Brands Inc that owns companies like Dunkin Donuts, Baskin Robins etc. Dunkin Donuts is a multinational company with its presence in more than 32 nations. By the end of 2011, there were 10,083 Dunkin' Donuts stores worldwide that included 7,015 franchised restaurants in the United States of America and 3,068 international outlets in more than 32 countries across the globe employing more than 9000 people. According to the financial report published by Dunkin Brands Inc, the parent company of Dunkin Donuts the net sales worldwide totaled up to $8.77 billion, up 5.2 percent from the previous year and the Net income for the year was $108.3 million, up 214.5 percent as reported by the company.
Problem is Thai people interest with Krispy Kreme lower than the beginning period, so male Krispy Kreme no more long queues although Krispy Kreme launch more favors, but not attraction customer like beginning period. Now Krispy Kreme has not yet opens a new branch although I think Krispy Kreme must to open new branch.
In 2003, the U.S. doughnut industry was a $5 - $6 billion market. American households consumed an estimated 10 -12 billion doughnuts annually; this translates into over three dozen doughnuts per capita. In 2002, doughnut industry sales rose by about 13%. Sales from doughnut outlets rose by about 9%, to approximately $3.6 billion, whereas packaged doughnut sales at supermarkets, convenience stores and other retail outlets staggered in the past five years. A study by Technomic confirmed the growth of doughnut shops and identified this segment as the fastest-growing dining category in the country. Further analysis provided by the following figure shows attractiveness and profitability