Krispy Kreme Marketing Plan

1.0 Executive Summary

Krispy Kreme Doughnuts owns and franchises stores that produce and sell over 20 different types of specialty doughnuts. Since the company's founding in 1937, Krispy Kreme has grown into a leading specialty retailer producing over 1.8 billion doughnuts a year. With the acquisition of Digital Java in 2002, Krispy Kreme expanded its product line to include gourmet coffee. Retail stores now brew and sell our own line of coffee, which puts us in direct competition with many food and beverage establishments. In the recent years, Krispy Kreme has been expanding rapidly in both the United States and abroad. Our most important source of marketing has been our loyal customer base and "word of mouth". Our market is everyone, everywhere. Krispy Kreme has become a universal product and a global brand. This has all been accomplished without the expensive costs of brand building and product awareness. As we move into the future and continue to grow domestically and internationally, our original stores will serve as a blueprint for all other markets. We have significant growth opportunities domestically and internationally.

2.0 Situation Analysis

Krispy Kreme has had a strong presence in the southeastern United States for over forty years. Eight years ago, a business model was put into place and the company began expanding throughout the nation. Last year, we entered into 27 new U.S markets. In December 2001, we opened our first international store in Ontario, Canada. Since that time, our business operations have expanded into three additional international markets: Australia, the United Kingdom and Mexico. In recent years, our target market has been cities with a population of 100,000+. As we continue to grow in the future, we will begin to expand our operations into smaller communities.

In 2003, Krispy Kreme opened 86 new factory stores and 13 satellite stores. There are currently 360 retail stores operating in the U.S. and abroad. Last year, sales increased 26.5%. Total revenues were $665.6 million, a 35.4% increase over the previous year. The net income of Krispy Kreme for 2003 was $56.8 million. This is a 45% increase over the previous year. Our store opening in Medford, MA had a record first week sales of $506,917. In the next fiscal year, Krispy Kreme plans to open an additional 120 stores and to further expand in international markets.

2.1 Market Situation

The food and beverage industry as a whole is growing rapidly. Increasingly, Americans are "on-the-go" and eating meals away from home. In 2003, Krispy Kreme doughnut sales increased at twice the industry average. Doughnuts are fast and affordable treats, and Americans are not just eating doughnuts for breakfast. Half of Krispy Kreme sales occur in the late afternoon and early evening. People are eating doughnuts for dessert and for a quick snack. Krispy Kreme even receives orders for wedding cakes made of doughnuts. Every time a new Krispy Kreme opens in a community, it increases the overall awareness of doughnuts. Our competitors even see increased doughnut sales when a Krispy Kreme opens a new location. As we expand internationally, we hope to spread America's love of doughnuts around the world.

2.1.1 Market Demographics

Demographically, Krispy Kreme has no limits. People of all ages, ethnicity and income enjoy our products. Our international stores have been enthusiastically accepted in all cultures. We do not define our markets by geography - we define our markets by their stages of development.

We view our target markets as:

ESTABLISHED

EMERGING

NEW

UNDEVELOPED

Market Geographies: Our strongest market is the southeastern United States and is our 'Established' target market. We have been doing business in this part of the country for over 65 years. We have a very loyal customer base which crosses all demographic lines. Since our nation-wide expansion began in 1996, we have primarily focused on large cities and urban areas. As we continue to grow, we will expand our operations into communities with smaller populations that are currently serviced by off-premise retail sellers such as grocery stores and convenience stores. Both of these expansion strategies make up part of our 'Emerging' and 'New' target markets.

Market Demographics: Within our current markets, our demographic with the highest 12-month patronage (26%) has been mid-boomers ages 42-55 (Sheridan 2003).

Market Psychographics: We have been very successful in large urban areas because customers are looking for cheap and convenient food. Customers are often in a hurry, so we cater to this by offering drive-through locations and off-premise sales. Many of our customers view Krispy Kreme as a special treat. They do not eat doughnuts every day, but when they do, they come to Krispy Kreme for our doughnuts as well as the "Krispy Kreme experience".

Market Behaviors: Customers typically visit occasionally and buy large quantities of doughnuts. Despite the trend of health consciousness in the United States, people still love to splurge on doughnuts. Our product is delicious, convenient and affordable which keeps our customers coming back for more.

2.1.3 Macroenvironment Situation

According to the National Restaurant Organization, Americans spend approximately $354 billion annually at food and beverage establishments (Fox 2003). Of this amount, approximately $3 billion is spent on doughnuts alone. Over $6 billion is spent annually on gourmet coffee, and with our expanded coffee and beverage line, we have broadened our market. This will be very important in sustaining our long-term competitive edge.

Americans are increasingly looking for fast, affordable and convenient food alternatives. Fewer households are preparing meals at home and this trend is expected to increase in future years. Krispy Kreme satisfies each of these consumer desires. Krispy Kreme retail stores are conveniently located off of major thoroughfares to allow easy access for customers. Many retail stores feature drive through windows as an added convenience. Our products are also available in grocery and convenience stores for customers in areas without a retail location.

Despite a trend in the U.S. towards healthier eating and low carbohydrate diets, Krispy Kreme's business has remained unaffected. People view