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Introduction

1937- Vernon Rudolph bought secret yeast recipe from aFrench 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.

1950sImproving and automating the doughnut making

equipment.

1960s Steady growth throughout the Southeast.

Consistent store designs.

1973Founder Vemon Rudolph dies.


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Introduction (cont)

1976 Company sold to Beatrice Foods and growthslowed.

1982Franchisees bought company back.

1996 - Expands outside the Southeast region, first store

in New York. 1999 Other store in California, national expansion

underway.

December 2001First international store in Canada.

October 2003 First store in Europe at England(London).

.


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Introduction (cont)

In 2003, a pilot project in Mountain View, California, tosell 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 .


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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


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Vision and Mission

Our Vision

To be the global leader in doughnuts and complementary

products, while creating magic moments worldwide.


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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


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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 toconsumers

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


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Key Factors

Customers

Supplies

Whole seller


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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 milliondoughnuts every day.

Strong earnings andconsistent sales growth.

9


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We generate revenues from three distinct sources.

Company Stores.

On-premises sales.

Off-premises sales.

Franchise.

KK Supply Chain.

Mix manufacturing.

Equipment.

Distribution.

Business Operations


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4 WAYS TO RAISE FUNDS

Traditional Doughnut Sales

Certificates

Partnership Cards

Coffee


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Store Layout/Design

Freestanding: Most free-standing Krispy Kreme stores areconstructed with a long window between the customer area and thekitchen, allowing customers to watch the operation of the doughnut-making machines.

Smaller Stores: Most of the smaller stores get their donuts fromother locations rather than producing them on-site.

Atmosphere: Very welcoming,with bright lighting. Seating islimited but available. Factorytends to pull curious customersinside.


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Advertisement / Marketing

Free doughnut strategy Hot Now; free doughnut while waitingin 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).
http://www.krispykreme.com/tv/http://www.krispykreme.com/tv/


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Distinguishing Aspects

Store Layout: Factory inside the store where you can watchhow the donuts are made.

Reputation: Krispy Kreme has always been known as and hashad 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.
http://video.google.com/videoplay?docid=-1560531662653117022&q=krispy+kreme+donut+factory&hl=enhttp://video.google.com/videoplay?docid=-1560531662653117022&q=krispy+kreme+donut+factory&hl=en


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Social Responsibility

Gave away free donuts during 2008Election if you voted


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Competitors

Dunkin Donuts- Privately owned

Starbucks- coffee shop with 8,800 worldwidelocations

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


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Dunkin Donuts

dunkindonuts.com

themarketingguy.wordpress.comto be

Claims to be the worlds largest

coffee and baked goods chain.

Serving 2.7 million customers per day

5,769 U.S. locations

20 countries

Wholly owned private subsidiary


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(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

Margin

3.0% 2.5% 2.7% 3.3% 3.6%

Dunkin Donuts

Revenue

$3,200,000 $3,616,000 $3,800,000 $5,000,000 $5,220,000

Dunkin Donuts

Profits

$277,360 $289,600 $311,600 $440,000 $475,020

Dunkin Donuts

Profit Margin

8.7% 8.0% 8.2% 8.8% 9.1%

dunkindonuts.com


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Gourmet Coffee sales, 2008

Starbucks

43%

Dunkin'Donuts

27%

Krispy Kreme5%

Tim Horton's2%

Other23%


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Starbucks

World premier roaster and retailerof specialty coffee

8812 own stores 7852 license stores in more than 50

countries

Annual sale $10 million in 2010


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Tim Hortons

Tim Hortons was founded in 1964 Quick service industry Coffee and

baked goods

3204 locations throughout Canadaand the United States


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Company Indicators

Sells over 20 types of doughnuts. Produces 5 milliondoughnuts 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)


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Situational Analysis

Environment

The Organization

The Marketing Strategy


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Environmental analysis

Internal factors

Strong brand recognitionand recall

Wide appeal of signature

glazed doughnuts

Vertical integration

Development in

international markets

Strong channel of

distribution

Quality of product

Expanded assortment of

offerings at KKD stores

including beverages

External factors

Increasing popularity of

coffee shops and bakery

cafs

Popularity of American

foods and fashion inoverseas markets

Channel expansion

possibilities (i.e., Internet

pre-ordering) Competitors like Dunkin

Donuts and Starbucks

Low-carb trend in eating

preferences


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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 companys 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 companys

accounting practices.

December 2004, they announced still moreaccounting errors


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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.


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Marketing Strategies (cont)

Vertical integration supply chain.

Short-shelf life products.

Failure to do appropriate and effective market research


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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


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Strengths (cont)

Vertical integration helps ensure highquality product

Consistent expansion; now in 16 countries

Product sold at thousands ofsupermarkets, convenience stores,and retail outlets through U.S.


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Weaknesses

Return on equity, assets, and investments all negative inthe 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 offlux

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 strugglingwith how to make stores profitable


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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 areasoutside southeast of U.S. where most stores are

Revenues down, net losses in each of past three years


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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.


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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


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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


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Threats (cont)

Restricted cash flow from banks andmassive layoffs have stifled the world

economy, decreasing discretionary income

Europeans prefer their local brands ofdoughnuts

Shareholders may sell KKD stock for

lack of returns and dividends compared toother similar firms in the industry

I F E


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I.F.E

E F E


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E.F.E

C.P.M


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C.P.M

(BCG)


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(BCG)

Problems Found in Situational


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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 resultedin store closings and or expansions that were notbacked up by market data or evidence that thisinvestment would be feasible.

The company spent very little on advertising

depending largely on word of mouth, and localpublicity.


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As a result, Krispy Kreme acquired a company in 2007that by the end of fiscal year 2008, had lost $25 million

dollars.

The second problem is using a vertically integrated

supply chain


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Conclusion

The food industry has been affected by a recent trend

toward quick eating habits. Krispy Kreme hascapitalized on this trend by positioning doughnuts as a

popular, on-the-go food.

Krispy Kremes success has hinged on consistency

throughout its locations and by delivering a high qualityproduct.Future growth opportunities includeexpanding franchises as well as penetratingalternate distribution channels.

As Krispy Kreme analyzes potential growthopportunities within alternate distribution channelssuch as convenience stores and grocery chains, itmust determine whether doing so will sacrificebrand equity and product quality.


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It is believe that Krispy Kreme can be successful in

launching its product in new markets without establishing

physical locations. Alternative channel distribution willhelp bring the Krispy Kreme product to millions of

potential customers who have yet to experience the taste

of Americas best doughnut.


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Recommendations

Reduce operating expenses

Change entire manufacturing and distribution strategyImplement par baked manufacturing operation.

to allow individual stores to decrease in size, thuslowering 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 asneeded (important b/c fresh goods low shelf life

Par bake will allow for hot doughnuts now all of thetime.

Implications of transition to par bake operation


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New Plant Equipmentfreezers, production equipment,freezer trucks for distribution/delivery.

Store Equipmentfreezers, oven for various par baked

goods, fryers for doughnuts.

R&D for unique par bake operation

Recommendation (cont)


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Recommendations (cont)

2- Develop stronger relations and controlof franchisees

Short-term period of one yearpostpone new franchise

agreements/new store openings

Implement Franchise Support Systems

Communicationbetween corporate and franchisees

Supporttraining, advertising

Utilize recommendation #1 in order to lower operatingexpenses for franchisees.


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Implement Marketing Strategies

Advertisingnational television and radio advertising

campaign based on hot doughnuts now.

Marketing researchperiodic research to stay abreast oftrends.

R&Dproduct development

Strengthen Competitive Advantage

Strengthen Competitive Advantage through differentiation

in products and services.

Continue to utilize hot doughnuts now

Expand product line

R f


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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
http://www.krispykreme.com/http://www.krispykreme.co.uk/store-locator/http://www.youtube.com/user/KrispyKremeDoughnutshttp://www.youtube.com/user/KrispyKremeDoughnutshttp://www.krispykreme.co.uk/store-locator/http://www.krispykreme.co.uk/store-locator/http://www.krispykreme.co.uk/store-locator/http://www.krispykreme.com/

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