She's far from alone. The chain has a loyal fan base often
willing to drive more than 30 minutes to one of its 240 U.S. shops
for what CMO Dwayne Chambers calls a "kind of reward, a simple
indulgence." Krispy Kreme's regular customers frequent the chain an
average of one-and-a-half times a month.
That may be far less than the average fast-food customer, who
will often make multiple visits per month, or even Dunkin's
regulars, but something is clearly working: If Krispy Kreme reports
an increase in same-store sales when it releases fourth-quarter
earnings this week, it will mark the 21st consecutive quarter that
all-important metric has risen.
Such sustained growth is highly unusual for chains, especially
post-recession, according to Darren Tristano, exec VP at food
industry-research firm Technomic. He noted chains like McDonald's
and Chipotle have had sustained growth, but even McDonald's hit a
snag after nine years of positive global sales. "It's like sports
-- it's difficult to win every game, since growth in sales is
usually year over year."
For its fiscal third quarter ended November 2013, same-store
sales at Krispy Kreme's company-owned stores were up 3.7% from the
previous quarter. Franchised stores showed even better performance,
with a same-stores sales hike of 10.7%. (Of its 253 U.S. locations,
95 are company-owned.) The gains were attributed mainly to retail
That performance is even more impressive considering some major
headwinds Krispy Kreme is battling. Dunkin' Donuts, McDonald's,
Starbucks and others are all duking it out for a share of the $50
billion breakfast market. Krispy Kreme's growth also comes as fatty
foods are under fire, and despite the chain's overexpansion, which
began in the late '90s.
Krispy Kreme's Chicago location is the last one standing in the
area after the company closed stores throughout the U.S. a handful
of years ago, recognizing that it opened had too many stores too
quickly and overreached by expanding into grocery and convenience
stores. Krispy Kreme's sales peaked in 2005 with $1.07 billion
across 272 U.S. stores, according to Technomic. But by the time it
began to scale down in 2009, sales from its 222 U.S. stores had
dropped to $468 million.
"They got away from what people got excited about with Krispy
Kreme," said Elizabeth Friend, an analyst at Euromonitor. "They
were in every grocery store and convenience store." The aggressive
expansion cut into its cult status and damaged quality control.
"Suddenly, when you're seeing old, dried out Krispy Kreme doughnuts
in the [convenience] store, the brand loses cachet," she said.
Growth since then has been slow but steady. The chain, Ms.
Friend said, has been focusing on improving operations and the
customer experience at its shops, most of which are factory-style
stores where customers can see the doughnuts being made. Wholesale
operations are less of a focus, though the company still sells
doughnuts through retailers like Sam's Club.
"It's unusual to be able to bounce back like that," said Mr.
Tristano. "Once a restaurant starts to decline that much, it's
difficult to recover." He added that much of the difficulty in
rebounding has to do with aligning management properly, improving
franchise operations and shoring up financials after sales declined
so much. Even so, "they're moving in the right direction, but they
haven't yet regained the footing they once had."
For the first nine months of its fiscal 2014 year it reported
revenue of $347.6 million. It now has 253 U.S. locations, 95 of
which are company-owned.
What's left now are well-performing operations and its trademark
bare-bones marketing strategy, which includes very little
measured-media spending and no agency of record. Mr. Chambers said
the company hasn't changed its marketing approach since he arrived
in 2010: It's focused on local and community outreach through
digital, with a big social component.
The brand "was built on word-of-mouth," he said, making social
media a natural fit. The chain will periodically invest in event
marketing, like when it bought a 1960 Starliner bus, dubbed the
Krispy Kreme Cruiser, and embarked on a tour of events and
festivals in 37 states.
And while doughnuts will always be its primary focus, Krispy
Kreme in 2011 started to integrate coffee into its main business in
unorthodox ways. Last month, it rolled out two coffee-flavored
doughnuts -- the Mocha Kreme and Caramel Coffee Kreme doughnuts --
on a limited-time basis. It also struck a deal with Walmart to sell two types of
bottled iced coffee, Original Glazed Iced Coffee and Mocha Iced
Coffee, in 9.5-ounce bottles for $1.98, in 900 locations. (Krispy
Kreme already has a deal to sell 40-ounce bags of its House Blend
coffee in Sam's Club stores across the Southeast.) The chain is
also said to be planning to roll out a gluten-free doughnut this
"It's another opportunity to bring variety to our doughnut menu
offerings," Mr. Chambers said.