When it comes to generating sales, Krispy Kreme apparently had a Twix up its sleeve.
The Charlotte-based doughnut chain said that its organic revenue, a key measure of sales at existing major locations, rose 15% in the first quarter as consumers consumed more of its doughnuts and the company found more places from which to sell them. Doughnut sales alone are up 13% over the same period a year ago.
Much of that was driven by the chain’s limited time offers. Krispy Kreme last quarter stuffed a Twix bar in a doughnut. The result generated attention beyond traditional marketing and lifted sales.
“One of the first things that we try to do in innovation when we come up with something pretty unique and differentiated is the social media strategy that we really push,” CEO Michael Tattersfield told investors this week, according to a transcript on the financial services site Sentieo. “So, you get these impressions that get you brand awareness.”
Krispy Kreme under Tattersfield has used that strategy with considerable success as it returned to the public markets last year. That year, it gave free doughnuts to people who could prove they were vaccinated.
More recently, the company has tied its doughnut prices to gas, launching a promotion in April in which it sold a dozen doughnuts for the same price as a gallon of gas on Wednesdays, about $4. It has high hopes for additional products, such as cinnamon rolls that it sells on Sundays and new Cinnamon Toast Crunch doughnuts.
The efforts generate media impressions and lift sales. The gas promotion, Tattersfield said, lifted sales in the middle of the week.
“We don’t spend [heavily] on the marketing side,” he said. “So, we use the power of the brand and its uniqueness of products, [such as] a Twix bar that was in the middle of the doughnut.”
What’s more, Tattersfield said, customers are willing to pay higher prices for some of these doughnuts, such as the Twix doughnut. “All these initiatives, driven by innovation and premiumization, give us real pricing power, sometimes up to 50% more per individual item than our Original Glazed doughnut,” he said, adding that they are “scalable opportunities for our business and provide a notable offset to current inflationary pressures.”
The company did increase price last year, but its profit margins of 13.1% in the first quarter was higher than it was in the second half of 2021, CFO Joshua Charlesworth said.
Krispy Kreme operates a unique, “omnichannel” brand that uses more than 400 “hubs” around the world that make doughnuts for 11,000 “spokes,” or points of access where it delivers doughnuts every day. By increasing points of access, and getting product to them every day, Krispy Kreme believes it can increase the efficiency of its doughnut-making locations.
Those access points include shelves at retailers, which it calls “DFD Doors,” that cost relatively little to open, between $2,000 and $10,000 per location. The company’s goal is to increase the number of access points to 50,000. “Our biggest growth opportunity is getting to more than 50,000 global points of access,” Tattersfield said, noting that sales increased 27% per DFD door over the past year in the U.S. and Canada.
Krispy Kreme also operates the late-night cookie delivery concept Insomnia Cookies, where organic revenue increased 9.7% and total revenue rose 13.8%. The company added seven new shops in the quarter and expects to add more than 30 shops this year. Insomnia operates 217 locations and executives want to double its location count over the next five years.
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