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KRISPY KREME CASE ANALYSIS
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Group Member Wajahat Ali Mudassar Iqbal Ata Makhdoom Muhammad Qaswar TanveerAhmad
ContentsContents IntroductionVision, mission and valuesKey factorsWays to raise fundBusiness operation Competitors Social responsible Stores LayoutAdvertisement/Marketing Distinguishing aspect Company Indicators
Situational AnalysisSwot Analysis IFE,EFE,CPM and BCG Problem Found in Situational and Environmental
Analysis Conclusion Recommendation References
IntroductionIntroduction
1937- Vernon Rudolph bought secret yeast recipe from a French chef in New Orleans
Expanded from local store to nation wide chain of storesHeadquartered in Winston Salem, North Carolina1940s – 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.
Introduction (cont)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)..
Introduction (cont)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 .
Introduction (cont)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 countries93 company owned and 430 franchisees4500 full time employees
Vision and MissionVision and Mission
Our Vision
To be the global leader in doughnuts and complementary products, while creating magic moments worldwide.
Mission statement 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 ideasHighest quality, andCaring service
Our ValuesOur ValuesOur Values
(with acknowledgement to Founder, Vernon Rudolph) we believe...
Consumers are our lifeblood, the center of the doughnutThere is no substitute for quality in our service to
consumersWe must produce a collaborative team effort that is
unexcelledWe must cast the best possible image in all that we doWe must never settle for "second best"; we deliver on
our commitments
Key FactorsKey Factors
Customers SuppliesWhole seller
Case Study: Krispy Kreme Doughnuts, Inc.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
We generate revenues from three distinct sources. Company Stores.
On-premises sales. Off-premises sales.
Franchise. KK Supply Chain.
Mix manufacturing. Equipment. Distribution.
Business OperationsBusiness Operations
4 WAYS TO RAISE FUNDS4 WAYS TO RAISE FUNDS
Traditional Doughnut SalesCertificatesPartnership CardsCoffee
Krispy Kreme U.S.Krispy Kreme U.S.
Krispy Kreme WorldwideKrispy Kreme Worldwide
Store Layout/DesignStore 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.
Advertisement / MarketingAdvertisement / 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).
Distinguishing AspectsDistinguishing 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.
Social ResponsibilitySocial ResponsibilityGave away free donuts during
2008 Election if you voted
CompetitorsCompetitors
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
Dunkin DonutsDunkin Donuts
dunkindonuts.com
themarketingguy.wordpress.comto be◦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
(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
Gourmet Coffee sales, Gourmet Coffee sales, 20082008
StarbucksStarbucksWorld premier roaster and retailer of specialty coffee
◦8812 own stores◦7852 license stores in more than 50
countries◦Annual sale $10 million in 2010
Tim HortonsTim HortonsTim Hortons was founded in 1964Quick service industry – Coffee and baked goods
3204 locations throughout Canada and the United States
Company IndicatorsCompany IndicatorsSells 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)
Situational AnalysisSituational Analysis
EnvironmentThe OrganizationThe Marketing Strategy
Environmental analysis Environmental analysis
Internal factorsStrong brand recognition
and recallWide appeal of signature
glazed doughnutsVertical integrationDevelopment in
international marketsStrong channel of
distributionQuality of productExpanded assortment of
offerings at KKD stores including beverages
External factors Increasing popularity of
coffee shops and bakery cafés
Popularity of American foods and fashion in overseas markets
Channel expansion possibilities (i.e., Internet pre-ordering)
Competitors like Dunkin Donuts and Starbucks
Low-carb trend in eating preferences
Organization AnalysisOrganization Analysis
Strategy is focused on revenueorganizational 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”
Marketing StrategiesMarketing 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 businessNew stores are opening, close to the older stores within
the same market.Their training, facilities management and franchise
management is good strength of kk.
Marketing Strategies Marketing Strategies (cont)(cont)
Vertical integration supply chain. Short-shelf life products.Failure to do appropriate and effective market research
S.W.O.T AnalysisS.W.O.T Analysis
StrengthsAffordable, high-quality doughnuts with strong visual
appeal and "one-of-a-kind" tasteNeon "Hot Doughnuts Now" sign encourages people
outside the store to make an impulse purchaseMarket research shows appeal extends to all major
demographic groups including age and incomeHot shop" stores save money while keeping KKD
customer experience intact
Strengths (cont)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.
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
Weaknesses (cont)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
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.
Opportunities (cont)Opportunities (cont)
Asians love sweets and are open to trying foreign foodsStarbucks lacks a diversified and distinctive pastry lineDunkin' Donuts does not have hot doughnuts to sellMany children love sweet treats
Threats
Tough competition and increasing global recognition of Starbucks and Dunkin Donuts.
Global presence of the competitorsMore health conscious customer baseDevelopment of organic marketsStarbucks has approximately 25 times the amount of
stores worldwide that Krispy Kreme Donut has
Threats (cont)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
I.F.EI.F.E
E.F.EE.F.E
C.P.MC.P.M
(BCG)(BCG)
Problems Found in Situational, Problems Found in Situational, Environmental AnalysisEnvironmental 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.
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
ConclusionConclusionThe 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.
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.
RecommendationsRecommendationsReduce 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
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
Recommendation (cont)
Recommendations (cont)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 SystemsCommunication – between corporate and franchiseesSupport – training, advertisingUtilize recommendation #1 in order to lower operating
expenses for franchisees.
Implement Marketing StrategiesAdvertising – 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 AdvantageStrengthen Competitive Advantage through differentiation
in products and services.Continue to utilize “hot doughnuts now”Expand product line
ReferencesReferences
www.krispykreme.comen.wikipedia.org/wiki/Krispy_Kremewww.krispykreme.co.uk/store-locator/www.youtube.com/user/KrispyKremeDoughnutsStrategic management 13 edition