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ves dougnnuts and cofee as 23 different countries. Many Krispy an watch doughnuts being made and P ores are responsible for servicing loca upply Chain provides raw materials fom hnut- making Krisny Krem

ves dougnnuts and cofee as 23 different countries. Many Krispy an watch doughnuts being made and P ores are responsible for servicing loca upply Chain provides raw materials fom hnut- making Krisny Krem

MARKETING 2018
MARKETING 2018
19th Edition
ISBN:9780357033753
Author:Pride
Publisher:Pride
Chapter10: Digital Marketing And Social Networking
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Krispy Kreme Doughnuts, Inc., 2015 You are required to read the case study from the given above: Write a introduction about the company’s background using your own words.- Explain clearly and describes the company’s background, including its industry and extent of its multinational reach for identifying expansion factors and corporate strategies

Headquartered in Winston-Salem, North Carolina, Krispy Kreme Doughnuts (KKD) serves doughnuts and coffee as well as other snack items. The company has locations r additional assurance of in 23 different countries. Many Krispy Kreme shops are factory shops where customers arning questions which prove can watch doughnuts being made and purchase fresh hot doughnuts as well. The factory u understand and are able to stores are responsible for servicing local grocery stores and convenience stores. The KK ply the strategic concepts in Supply Chain provides raw materials for both franchise and company-owned stores in the is case, go to the assignment doughnut-making process. Krispy Kreme storeowners must purchase all materials from KK Supply Chain. Krispy Kreme reported total revenues in fiscal year end February 2015 of $490 million (up from $460 million the prior year) with about 90 percent of revenues TyManagementLab® ction of your MyLab. derived from the United States. For the fiscal first quarter (Q1) of 2015, Krispy Kreme's revenue rose percent year- over-year to $132.5 million, driven almost entirely by a 17.3 percent increase in Krispy Kreme's store count. For that quarter, the company's domestic same-store sales rose 5.2 percent, but its international franchise same-store sales declined 1.7 percent. Overall for Q1 of 2015, the company's adjusted net income was $16.6 million, or $0.24 per share. The company's EPS number was up at least by the KKD buying back 391,300 shares of its stock for $7.4 million. Copyright by Fred David Books LLC. www.strategyclub.com (Written by Forest R. David) History Krispy Kreme traces its roots back to 1933 when Vernon Rudolph bought a doughnut shop in Paducah, Kentucky. After selling doughnuts in Kentucky, Tennessee, and West Virginia, the store known today as Krispy Kreme was moved to Winston-Salem. Krispy Kreme doughnuts were sold to grocery stores at first, but became so popular with customers that they requested the option to buy the doughnuts fresh and hot from the store, thus launching the doughnut factory retail store and selling directly to the public. Krispy Kreme grew quickly over the next four decades before being sold to Beatrice Foods Company in 1976. Shortly after the purchase by Beatrice, in 1982, several Krispy Kreme fran- chisees purchased the company back from Beatrice Foods and quickly established the current Doughnut Theater style of factory stores where by customers can watch doughnuts being made. It was not until 1996 that KKD finally expanded outside the Southeast by opening a store in New York City, followed in 2001 by opening its first store outside the United States, in Canada. The company went public with its IPO launch in April 2000. In the United Kingdom, KKD just concocted a single, gigantic box that holds 2,400 dough- nuts. The box (11.4 feet by 3 feet) was filled with doughnuts and required eight KKD employces to deliver it to 360 Resourcing Solutions. The box was part of a promotion for the new “Krispy Kreme Occasions" division that customizes doughnut offerings for corporate events or special occasions such as weddings and other celebrations. The division sells doughnut “towers" fors spe- cial events or even personalized doughnuts with customized, chocolate nameplates or corporate logos. The company has no plans to create another box, but it is happy to sell 100 of the so-called double-dozen boxes for about $2,600. Krispy Kreme opened its first store in India in 2013 in Bangalore, Karnataka, and now there are seven in that city. Also in 2013, KKD began opening stores in Colombia, with a total of 25 planned, as the first South American country for the company. In late 2013, KKD opened its first store in Taipei, Taiwan. In 2014, KKD opened its first shop in Chennai in southern India. CASE 1• KRISPY KREME DOUGHNUTS, INC., 2015 Internal Issues Vision/Mission Krispy Kreme Doughnuts does not appear to have a published vision statement. The company's mission statement, however, is given as follows: Consumers are our lifeblood, the center of the doughnut There is no substitute for quality in our service to consumers Impeccable presentation is critical wherever Krispy Kreme is sold We must produce a collaborative team effort that is unexcelled We must cast the best possible image in all that we do We must never settle for "second best;" we deliver on our commitments We must coach our team to ever-better results. (Source: Company documents) Distribution Krispy Kreme doughnuts are sold in KKD stores, grocery stores, convenience stores, gas stations, Walmart, and Target stores in the United States. Internationally, the doughnuts are sold in Loblaws supermarkets, Petro-Canada gas stations, and as freestanding stores in Canada, along with BP Service Stations and BP Travel Centers and 7-Eleven stores in Australia. In the United Kingdom, Tesco supermarkets, Tesco Extra, and most Tesco service stations carry KKD products, and service stations Moto, Welcome Break, and Road Chef also carry self-service KKD cabinets. Today, KKD has locations in the United Kingdom, Australia, Turkey, the Dominican Republic, Kuwait, Mexico, Puerto Rico, Taiwan, South Korea, Malaysia, Thailand, Indonesia, the Philippines, Japan, China, the United Arab Emirates, Qatar, Saudi Arabia, Bahrain, Hong Kong, and Ethiopia. Organizational Structure As illustrated in Exhibit 1, KKD basically has two segments: USA and International. Note the company does not have a Chief Operating Officer (COO), Chief Administrative Officer (CAO), or Chief Strategy Officer (CSO). However, KKD reports revenues by geographic region, but is not structured geographically. In fact, the company appears to be structurally functionally, rather than divisionally. EXHIBIT 1 KKD's Organizational Structure James Morgan, Chairman Tony Thompson, President and CEO 自自首自 Price Cooper, Executive VP Cathleen Allred, Senior VP of Cynthia Bay, Senior VP Daniel Beem, Senior VP Dwayne Chambers, Darryl Marsch, Senior VP, General Chief of U.S. and Senior VP Financial Human Franchises President of and Chief Officer, and Treasurer Resources and and International Marketing Officer Counsel Organizational Development Company and Secretary Stores Source: A depiction based on author's best judgment.
Transcribed Image Text:Headquartered in Winston-Salem, North Carolina, Krispy Kreme Doughnuts (KKD) serves doughnuts and coffee as well as other snack items. The company has locations r additional assurance of in 23 different countries. Many Krispy Kreme shops are factory shops where customers arning questions which prove can watch doughnuts being made and purchase fresh hot doughnuts as well. The factory u understand and are able to stores are responsible for servicing local grocery stores and convenience stores. The KK ply the strategic concepts in Supply Chain provides raw materials for both franchise and company-owned stores in the is case, go to the assignment doughnut-making process. Krispy Kreme storeowners must purchase all materials from KK Supply Chain. Krispy Kreme reported total revenues in fiscal year end February 2015 of $490 million (up from $460 million the prior year) with about 90 percent of revenues TyManagementLab® ction of your MyLab. derived from the United States. For the fiscal first quarter (Q1) of 2015, Krispy Kreme's revenue rose percent year- over-year to $132.5 million, driven almost entirely by a 17.3 percent increase in Krispy Kreme's store count. For that quarter, the company's domestic same-store sales rose 5.2 percent, but its international franchise same-store sales declined 1.7 percent. Overall for Q1 of 2015, the company's adjusted net income was $16.6 million, or $0.24 per share. The company's EPS number was up at least by the KKD buying back 391,300 shares of its stock for $7.4 million. Copyright by Fred David Books LLC. www.strategyclub.com (Written by Forest R. David) History Krispy Kreme traces its roots back to 1933 when Vernon Rudolph bought a doughnut shop in Paducah, Kentucky. After selling doughnuts in Kentucky, Tennessee, and West Virginia, the store known today as Krispy Kreme was moved to Winston-Salem. Krispy Kreme doughnuts were sold to grocery stores at first, but became so popular with customers that they requested the option to buy the doughnuts fresh and hot from the store, thus launching the doughnut factory retail store and selling directly to the public. Krispy Kreme grew quickly over the next four decades before being sold to Beatrice Foods Company in 1976. Shortly after the purchase by Beatrice, in 1982, several Krispy Kreme fran- chisees purchased the company back from Beatrice Foods and quickly established the current Doughnut Theater style of factory stores where by customers can watch doughnuts being made. It was not until 1996 that KKD finally expanded outside the Southeast by opening a store in New York City, followed in 2001 by opening its first store outside the United States, in Canada. The company went public with its IPO launch in April 2000. In the United Kingdom, KKD just concocted a single, gigantic box that holds 2,400 dough- nuts. The box (11.4 feet by 3 feet) was filled with doughnuts and required eight KKD employces to deliver it to 360 Resourcing Solutions. The box was part of a promotion for the new “Krispy Kreme Occasions" division that customizes doughnut offerings for corporate events or special occasions such as weddings and other celebrations. The division sells doughnut “towers" fors spe- cial events or even personalized doughnuts with customized, chocolate nameplates or corporate logos. The company has no plans to create another box, but it is happy to sell 100 of the so-called double-dozen boxes for about $2,600. Krispy Kreme opened its first store in India in 2013 in Bangalore, Karnataka, and now there are seven in that city. Also in 2013, KKD began opening stores in Colombia, with a total of 25 planned, as the first South American country for the company. In late 2013, KKD opened its first store in Taipei, Taiwan. In 2014, KKD opened its first shop in Chennai in southern India. CASE 1• KRISPY KREME DOUGHNUTS, INC., 2015 Internal Issues Vision/Mission Krispy Kreme Doughnuts does not appear to have a published vision statement. The company's mission statement, however, is given as follows: Consumers are our lifeblood, the center of the doughnut There is no substitute for quality in our service to consumers Impeccable presentation is critical wherever Krispy Kreme is sold We must produce a collaborative team effort that is unexcelled We must cast the best possible image in all that we do We must never settle for "second best;" we deliver on our commitments We must coach our team to ever-better results. (Source: Company documents) Distribution Krispy Kreme doughnuts are sold in KKD stores, grocery stores, convenience stores, gas stations, Walmart, and Target stores in the United States. Internationally, the doughnuts are sold in Loblaws supermarkets, Petro-Canada gas stations, and as freestanding stores in Canada, along with BP Service Stations and BP Travel Centers and 7-Eleven stores in Australia. In the United Kingdom, Tesco supermarkets, Tesco Extra, and most Tesco service stations carry KKD products, and service stations Moto, Welcome Break, and Road Chef also carry self-service KKD cabinets. Today, KKD has locations in the United Kingdom, Australia, Turkey, the Dominican Republic, Kuwait, Mexico, Puerto Rico, Taiwan, South Korea, Malaysia, Thailand, Indonesia, the Philippines, Japan, China, the United Arab Emirates, Qatar, Saudi Arabia, Bahrain, Hong Kong, and Ethiopia. Organizational Structure As illustrated in Exhibit 1, KKD basically has two segments: USA and International. Note the company does not have a Chief Operating Officer (COO), Chief Administrative Officer (CAO), or Chief Strategy Officer (CSO). However, KKD reports revenues by geographic region, but is not structured geographically. In fact, the company appears to be structurally functionally, rather than divisionally. EXHIBIT 1 KKD's Organizational Structure James Morgan, Chairman Tony Thompson, President and CEO 自自首自 Price Cooper, Executive VP Cathleen Allred, Senior VP of Cynthia Bay, Senior VP Daniel Beem, Senior VP Dwayne Chambers, Darryl Marsch, Senior VP, General Chief of U.S. and Senior VP Financial Human Franchises President of and Chief Officer, and Treasurer Resources and and International Marketing Officer Counsel Organizational Development Company and Secretary Stores Source: A depiction based on author's best judgment.
10 STRATEGIC MANAGEMENT CASES Strategy Krispy Kreme Doughnuts has long prided itself on hot fresh doughnuts and a one of a kind taste. As you can easily watch at a KKD factory store Doughnut Theater, the original glazed doughnut is fried before it heads toward a glazing waterfall to be covered in a sugary signature glaze. There is only one supplier of KKD's signature glaze. In addition to entertaining guests, KKD feels the Doughnut Theater also reveals the firm's commitment to quality and freshness. To help attract customers into the store, the original hot doughnuts sign is lit during peak production hours, generally carly in the morn- ings and late at night, when customers are most likely to visit the stores. In essence, KKD's strategy is hot fresh doughnuts, but the firm also sells its products in gas stations, grocery stores, and other retail outlets. About 50 percent of all KKD revenue is derived from wholesale outlets, so the firm plans to work on ways to improve the freshness and quality of its doughnuts sold in various retail locations. The company is transitioning toward smaller factory shops that will focus on retail rather than wholesale customers. This strategy appears more in line with the firm's new marketing approach. Many new stores in the southeastern United States will be company owned, whereas new smaller factory stores outside the southeast are more likely to be operated under franchisee agreements. Krispy Kreme Doughnuts has long helped the communities with fund-raisers, even offering special packaging at times. Fund-raisers are under the firm's “local relationship marketing" strat- egy. The company does a good job attracting customers from local businesses and families. About 55 percent of all domestic transactions are for doughnut orders of 1 dozen or more. However, this is also partly explained by the volume discount provided for such orders. International orders of a dozen or more doughnuts at a time are a significant portion of sales as well, indicating that doughnut consumption habits are more homogeneous globally than some may believe. The com- pany likes to mention homogeneity as a part of its "sharing concept," which is a key aspect of the firm's global marketing strategy. In carly 2014, KKD and Keurig Green Mountain Coffee agreed to create both decaf and regular Krispy Kreme coffee for Keurig coffee makers. Customers can purchase the products at both Keurig and KKD websites as well as at KKD factory stores, grocery, retail, and other channels throughout the United States. Krispy Kreme also has a new line of iced coffee. About 89 percent of all KKD’s retail sales are derived from doughnuts, with the industry average closer to 50 percent of sales being derived from doughnuts. KKD is late to capitalize on selling coffee and other drinks, but the company is making efforts. Segments Krispy Kreme Doughnuts is broken down into (1) Company Stores, (2) Domestic Franchise, (3) International Franchise, and (4) KK Supply Chain. Company Stores and Domestic Franchise stores are similar, only differing in ownership. Both Company Stores and Domestic Franchise Stores consist of full factory stores and satellite stores. International Franchise Stores are designed the same way as Company Stores and Domestic Franchise with 125 factory stores and 449 satellite shops in foreign markets. KK Supply Chain supplies both Company and Franchise stores, which all are required to purchase its products from KK Supply Chain. As of February 2015, there were 278 KKD stores operating domestically in 38 states and in the District of Columbia, and another 523 shops in 23 other countries around the world. The company has plans to grow international stores to 900 by January 2017. Krispy Kreme Doughnuts' revenue by geographic region is provided in Exhibit 2. Note the nice increases everywhere except in the Other Americas. EXHIBIT 2 KKD's Revenues by Geographic Region (in thousands of USD) February 2015 February 2014 United States $438,801 $412,743 Other Americas 9,973 10,000 Asia/Pacific 28,575 25,460 Middle East & Europe 12,985 12,128 Total Revenues 490,334 460,331 Source: Based on KKD Annual Report, 2015, page 23. CASE 1• KRISPY KREME DOUGHNUTS, INC., 2015 EXHIBIT 3 KKD's Revenues by Company-Owned versus Franchise (in thousands of USD) Revenues Operating Income February 2015 February 2014 February 2015 February 2014 Company Stores $325,306 $306,825 $9,287 $11,334 Domestic Franchise 13,450 11,839 8,103 8,083 International Franchise 28,598 25,607 20,026 17,977 KKD Supply Chain After Adjustments 122,980 116,060 41,823 36,953 Totals 490,334 460,331 79,239 74,347 Source: Based on KKD Annual Report, 2015 page 41. Revenues and operating income by company-owned versus franchised stores are provided in Exhibit 3. Notice nice increases across the board, with international franchise lagging slightly. Krispy Kreme Doughnuts' revenues by retail versus wholesale are provided in Exhibit 4. Note that retail sales are the highest, accounting for 49 percent of 2014 revenues. However, col- lectively, wholesale sales accounted for 51 percent of total revenues led by grocers and mass merchants such as Walmart at 31 percent of total sales. Finance The fiscal year for Krispy Kreme Doughnuts ends in February. The company had an outstanding 2013 (ending February 1, 2014) on most financial areas. The firm's stock price was up over 100 percent, revenues increased 6 percent, and the company reported a 65 percent increase in net income. Much of the increases can be attributed to opening 80 new locations around the world, but KKD also reported 6.7 percent increase in comparable store sales. The company's CEO indicated in the spring of 2014 that overseas markets remain strong for the firm, with many new store openings having long lines for up to 3 months after opening. The CFO, Douglas Muir, retired in 2015, turning the reins over to Price Cooper. Also, KKD is increasing its $80 million stock buyback to $105 million in 2015. The company's most recent income statement and balance sheet are provided in Exhibits 5 and 6, respectively. External Issues The doughnut market in the United States is a $13 billion industry, with about 25 percent of sales coming from bulk doughnuts in the 1 dozen-size box and up. Another 40 percent of sales come from drinks with half of this being derived from coffee. Major rival Dunkin' Brands accounts for much of these sales with their popular coffee offerings. Yeast doughnuts account for about 10 percent of industrywide sales. Doughnut holes and other varieties account for about 10 nercent There are thousands of "mom-and-pon" doughnut and coffee shons globally
Transcribed Image Text:10 STRATEGIC MANAGEMENT CASES Strategy Krispy Kreme Doughnuts has long prided itself on hot fresh doughnuts and a one of a kind taste. As you can easily watch at a KKD factory store Doughnut Theater, the original glazed doughnut is fried before it heads toward a glazing waterfall to be covered in a sugary signature glaze. There is only one supplier of KKD's signature glaze. In addition to entertaining guests, KKD feels the Doughnut Theater also reveals the firm's commitment to quality and freshness. To help attract customers into the store, the original hot doughnuts sign is lit during peak production hours, generally carly in the morn- ings and late at night, when customers are most likely to visit the stores. In essence, KKD's strategy is hot fresh doughnuts, but the firm also sells its products in gas stations, grocery stores, and other retail outlets. About 50 percent of all KKD revenue is derived from wholesale outlets, so the firm plans to work on ways to improve the freshness and quality of its doughnuts sold in various retail locations. The company is transitioning toward smaller factory shops that will focus on retail rather than wholesale customers. This strategy appears more in line with the firm's new marketing approach. Many new stores in the southeastern United States will be company owned, whereas new smaller factory stores outside the southeast are more likely to be operated under franchisee agreements. Krispy Kreme Doughnuts has long helped the communities with fund-raisers, even offering special packaging at times. Fund-raisers are under the firm's “local relationship marketing" strat- egy. The company does a good job attracting customers from local businesses and families. About 55 percent of all domestic transactions are for doughnut orders of 1 dozen or more. However, this is also partly explained by the volume discount provided for such orders. International orders of a dozen or more doughnuts at a time are a significant portion of sales as well, indicating that doughnut consumption habits are more homogeneous globally than some may believe. The com- pany likes to mention homogeneity as a part of its "sharing concept," which is a key aspect of the firm's global marketing strategy. In carly 2014, KKD and Keurig Green Mountain Coffee agreed to create both decaf and regular Krispy Kreme coffee for Keurig coffee makers. Customers can purchase the products at both Keurig and KKD websites as well as at KKD factory stores, grocery, retail, and other channels throughout the United States. Krispy Kreme also has a new line of iced coffee. About 89 percent of all KKD’s retail sales are derived from doughnuts, with the industry average closer to 50 percent of sales being derived from doughnuts. KKD is late to capitalize on selling coffee and other drinks, but the company is making efforts. Segments Krispy Kreme Doughnuts is broken down into (1) Company Stores, (2) Domestic Franchise, (3) International Franchise, and (4) KK Supply Chain. Company Stores and Domestic Franchise stores are similar, only differing in ownership. Both Company Stores and Domestic Franchise Stores consist of full factory stores and satellite stores. International Franchise Stores are designed the same way as Company Stores and Domestic Franchise with 125 factory stores and 449 satellite shops in foreign markets. KK Supply Chain supplies both Company and Franchise stores, which all are required to purchase its products from KK Supply Chain. As of February 2015, there were 278 KKD stores operating domestically in 38 states and in the District of Columbia, and another 523 shops in 23 other countries around the world. The company has plans to grow international stores to 900 by January 2017. Krispy Kreme Doughnuts' revenue by geographic region is provided in Exhibit 2. Note the nice increases everywhere except in the Other Americas. EXHIBIT 2 KKD's Revenues by Geographic Region (in thousands of USD) February 2015 February 2014 United States $438,801 $412,743 Other Americas 9,973 10,000 Asia/Pacific 28,575 25,460 Middle East & Europe 12,985 12,128 Total Revenues 490,334 460,331 Source: Based on KKD Annual Report, 2015, page 23. CASE 1• KRISPY KREME DOUGHNUTS, INC., 2015 EXHIBIT 3 KKD's Revenues by Company-Owned versus Franchise (in thousands of USD) Revenues Operating Income February 2015 February 2014 February 2015 February 2014 Company Stores $325,306 $306,825 $9,287 $11,334 Domestic Franchise 13,450 11,839 8,103 8,083 International Franchise 28,598 25,607 20,026 17,977 KKD Supply Chain After Adjustments 122,980 116,060 41,823 36,953 Totals 490,334 460,331 79,239 74,347 Source: Based on KKD Annual Report, 2015 page 41. Revenues and operating income by company-owned versus franchised stores are provided in Exhibit 3. Notice nice increases across the board, with international franchise lagging slightly. Krispy Kreme Doughnuts' revenues by retail versus wholesale are provided in Exhibit 4. Note that retail sales are the highest, accounting for 49 percent of 2014 revenues. However, col- lectively, wholesale sales accounted for 51 percent of total revenues led by grocers and mass merchants such as Walmart at 31 percent of total sales. Finance The fiscal year for Krispy Kreme Doughnuts ends in February. The company had an outstanding 2013 (ending February 1, 2014) on most financial areas. The firm's stock price was up over 100 percent, revenues increased 6 percent, and the company reported a 65 percent increase in net income. Much of the increases can be attributed to opening 80 new locations around the world, but KKD also reported 6.7 percent increase in comparable store sales. The company's CEO indicated in the spring of 2014 that overseas markets remain strong for the firm, with many new store openings having long lines for up to 3 months after opening. The CFO, Douglas Muir, retired in 2015, turning the reins over to Price Cooper. Also, KKD is increasing its $80 million stock buyback to $105 million in 2015. The company's most recent income statement and balance sheet are provided in Exhibits 5 and 6, respectively. External Issues The doughnut market in the United States is a $13 billion industry, with about 25 percent of sales coming from bulk doughnuts in the 1 dozen-size box and up. Another 40 percent of sales come from drinks with half of this being derived from coffee. Major rival Dunkin' Brands accounts for much of these sales with their popular coffee offerings. Yeast doughnuts account for about 10 percent of industrywide sales. Doughnut holes and other varieties account for about 10 nercent There are thousands of "mom-and-pon" doughnut and coffee shons globally
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