Krispy Kreme

Krispy Kreme Doughnuts Case Study

Part 1- Situational Analysis

(a) External Analysis

Case Timing 1st Quarter 2005 (Period of January - April 2005)

Level of Analysis SBU

Market Definition U.S. Doughnut market вЂ" retail and wholesale

Market size

• In 2003, the consumers in America spent an estimation of US$5 - US$6 Billion on doughnuts.

• Americans were consuming as much as 10 to 12 billion doughnuts.

• In 2002 sales at doughnuts outlets grew by 9% to US$3.6 Billion.

Market Growth Phase

Based on the time the product has been around, the product is at the late growth or near to maturity stage in the product life cycle. This is caused by the increasing competition in the market.

Macroeconomic Trends Analysis

Trends Implications Actions

Social вЂ"

People are more health conscious than before • Consumers will be looking for fewer amounts of calories and carbohydrates in their meals.

• Doughnut companies will lose grasp of the market, as doughnuts will soon be seen as only a treat, which consumers will buy only in a particular time. • Create a healthy alternative to doughnuts

Social вЂ"

People prefer to purchase at convenient locations (eg. Supermarkets) • A threat to Doughnut Outlets. • Expand market distribution channels.

• Implement new communication strategies

• Explore new channel opportunities

Economic вЂ"

Economic Downturn

• People are conscious about their own spending.

• People would be buying cheaper treats when they do not have enough money on hand. • Create product that serves economical segment in the market

Industry Key Trends Analysis

Trends Implications

In 2002 doughnut industry sales rose by about 13% With the doughnut industry on demand, the market is growing rapidly

American consumed an estimated 10 to 12 billion doughnuts annually There is a high consumption pattern presents a great opportunity.

Over 3 dozen per capita There is a high consumption pattern

The proliferation of bakery departments in supermarkets A threat to doughnut shops around. This trend had squeezed out many locally owned doughnut shops and to some extent, had constrained the growth of doughnut chains.

Had 80 percent regular customers (loyal customers) The loyalty of customers is great to businesses’ growth.

Fastest growing food category in the country The market will be tense, due to number of competitors joining the market.

Insights

Based on the level of consumption, there is still a high demand for doughnuts. More outlets and competitors are emerging in the market. Furthermore, with the increasing trends in healthy food products and availability of doughnuts in convenient locations (eg. Supermarkets), the market is reaching its maturity stage.

Competitor Analysis

Direct: Dunkin’ Donuts

Tim Hortons

Winchell’s Donut House

LaMar’s Donuts

Indirect: Fast food outlets (eg. McDonald’s)

Cafes and coffee shops (eg. Starbucks)

Healthy food outlets (eg. Bagel shops)

Restaurants that serve breakfast

Supermarkets with bakeries (eg. Woolworths)

Substitutes:

Chocolate, Candy, Bubble/Chewing Gums, Fruits, Snacks, Pastries and more.

Major Competitor Analysis

Dunkin Donuts

Strengths Implications

Largest coffee and baked goods chain in the world, selling 4.4 million doughnuts and 1.8 million cups of coffee daily. In 2004, the Dunkin doughnuts chain had total sales approaching US$4 billion. This is a strong competitor.

Store sales growth of 4.4% in U.S. There is a need to further categorise growth and determine what incentives were affecting the growth (menu expansion, existing customers or new acquired customers).

Owned by Allied Domecq’s Large Financial resources available

Had 6200 franchised outlets in 40 countries (global player) Company has to be aware of each of their targeted countries’ customer profiles.

Emphasis on convenience, rather than their eateries’ service Giving customers fast service rather than store experience.

Extensive range of menu choices Giving customers more varieties, which will lead to a wider customer base.

Weaknesses Implications

Their products are not considered healthy either Will not have a growth in business from the health conscious consumers.

The quality of food and coffee are not as good as the competitors Customers may only be attracted because of the price. May not have loyal customers.

Items are supplied centrally, rather than made on site. Items are not as fresh, compared to items being made on site. If customers’