July 17, 2008
Krispy Kreme: The Sugar High Aftermath
Ahh yes, the hot glazed doughnuts produced by the people at Krispy Kreme. Customers started lining the streets in 1937 to get their hands on the fresh baked sugar rounds when they could make their purchase through a hole in the wall of founder Vernon Rudolph’s bakery. Makes one wonder how a company in business for 70 years with a renowned product and dedicated customers that once lined the streets, fell from grace.
Aside from avoiding the greed laden financial scandal, could Krispy Kreme have taken a different path over the past 20 years? The answer is yes. Lets start with “why ruin a good thing?”. In their first 20 years of operation, Krispy Kreme was a giant in the doughnut world of the Southeastern United States. They were a thriving business with their first chain stores and they had standardized their doughnut mix and necessary machinery to produce the same quality and consistency of product through out each store. They probably weren’t making millions, but they had that “only in the South” flare and people would travel far and wide just to get their hands on the fresh hot glazed doughnuts. Krispy Kreme doughnuts were unique and word of mouth kept the doughnuts flowing out of the stores and, even today, word of mouth is the most effective marketing available.
By the year 2000 Krispy Kreme was not only all over the east and west coasts, they were international. Expansion in the 90’s was insane. And it didn’t stop, by 2004 Krispy Kreme not only had 429 factory stores cranking out hot glazed treats, but they had them on the shelves in 20000 grocery and convenience stores. Why travel to get the doughnuts from the factory store when you can easily pick them up while shopping for groceries or getting gas? What was once a high-end doughnut store chain, with a so fresh their still hot product, was now everywhere-only often not as fresh and generally not hot. They lost their long line of customers. They made their own factory stores obsolete. Had they stayed small and avoided the grocers and 7-11s, they may have saved their brand value. Coincidentally, it was at this same time that Krispy Kreme stocks started to fall and the company began experiencing “unexplained” profit losses.
Expansion is good, but it needs limits. Look at In&Out. It’s a California and Nevada only burger chain, but people love their stuff. They have high quality food for being a burger joint. They have had many offers to go national, but have opted not because they chose to avoid over-saturating, the way many companies do-which often leads to failure. Brilliance…
Keeping up with the times is a marketing must if you want to remain successful in our ever-changing world. Krispy Kreme’s Hot Glazed Doughnuts are far from a healthy snack. Very few humans missed the health revolution with the low-carb diets and movement away from fried and processed foods. People are eating better and it may be time to get creative and market some new products that fall in line with this trend. There was the whole-wheat doughnut and talk of the not-yet-seen sugar free variety, but there is plenty of room for providing a healthier alternative without losing the sugar-glaze that attracts thousands. On the same note, coming up with other non-doughnut products like fresh squeezed juices, organic milks and getting a consistent coffee throughout the stores could add a larger customer base. Donuts aren’t the biggest seller at competing businesses like Dunkin Donuts. People frequent these locals for the coffee, bagels and muffins. Not just for some sugar-glaze or jelly filling.
The Krispy Kreme brand is far from dead, but a different marketing strategy 20 years ago may have saved them from the struggles they are having today. They started in 1937 with a brilliant strategy of producing a superior product and promoting it very well, but they limited their success with over-saturation and a limited product line during changing times. It may be time to bring the fresh hot glaze back to it’s roots and let it start growing again.