Dive Brief:
- Krispy Kreme is exiting the snack aisle business, and will close the North Carolina facility that makes these items in May. With the factory closure, 102 jobs will be lost, according to a notice filed with the North Carolina Department of Commerce.
- Krispy Kreme will focus on its daily fresh delivery doughnut business. The company bakes doughnuts each day in its franchise locations and delivers them to other access points, including grocery retailers.
- While center-store baked goods have a great deal of popularity, they are different than their fresh counterparts. Center-store CPG snacks need to be able to last longer and they also may face stiffer competition from established brands.
Dive Insight:
This factory closure means Krispy Kreme’s CPG doughnut business is ending, but the QSR baker is concentrating on another strategy to get fresher baked goods in grocery stores.
From a business standpoint, Krispy Kreme has been turning more attention toward growing sales through its DFD program, which stands for delivered fresh daily. This program utilizes what the company calls a hub-and-spoke business model in which Krispy Kreme bakery locations are the hubs, and the locations they deliver the fresh-baked doughnuts to for sale are the spokes.
According to Krispy Kreme’s most recent earnings report last month, there are 5,741 places where fresh donuts baked at Krispy Kreme shops are sold in the U.S. and Canada. On Wednesday, CEO Michael Tattersfield said at a presentation at the Bank of America Securities 2023 Consumer & Retail Conference that the company expects to have 20,000 fresh-delivery locations globally by the end of this year.
“Our fresh daily doughnut business is strong, profitable and growing quickly. This is the area where we are focusing our investments and resources,” an emailed statement from Krispy Kreme said. “Because of this, we chose to exit our underperforming, extended shelf-life snack aisle business and cease production at our manufacturing facility in Concord, N.C., where these snack aisle products were made.”
Krispy Kreme got into the center store CPG business in 2020, launching packaged Doughnut Bites and Mini Crullers. But the sweets maker has not talked much about these products in recent earnings reports, instead making its comments on the fresh delivery business, its revenues and plans to expand.
Fresh delivery has buoyed the company’s recent sales. In its 2022 fiscal year, Krispy Kreme reported fresh delivery sales increased 10% at each location, according to its most recent earnings report.
Krispy Kreme is well known for its hot, fresh donuts at its shops, and Tattersfield said at the conference Wednesday that is what consumers want from the brand.
“The biggest challenge has always been, ‘I can’t get to you. Please get to me,’” Tattersfield said. “Imagine when gas prices are up at $5, $6, and you’re asking someone to then go 25 miles to a Krispy Kreme? And everybody’s saying, ‘Aren’t you gonna build a new one next to me?’ I’m like, ‘No. We’re actually going to get the donuts closer to you.’”
Krispy Kreme’s departure from the CPG snacks business creates more space in the center-store doughnut category, which was worth $1.8 billion in dollar sales, according to 52-week statistics from IRI (now known as Circana) in a February 2022 story in Commercial Baking. However, Krispy Kreme likely wasn’t a big player on center-store shelves. Its move to concentrate on fresh baked sales may actually hurt its former grocery store category, leading more consumers to buy their baked goods from a store’s fresh selection.
