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March 1, 2007

You're Kidding, Right?

Analysis of: Krispy tries a whole-wheat doughnut | www.nrn.com
This analysis is solely the work of the author. It has not been edited or endorsed by GLG.
Analysis By:
Andrew Ashbaucher
President, Little Dipper Associates, Inc.
Implications: They are good, they melt in your mouth, but whole-wheat doughnuts are not that answer to increasing sales for Krispy Kreme. 

Increased competition from coffee and energy drink sectors must be addressed, but is this the way to do it?


Analysis:

They are good.  They melt in your mouth, have a great taste, and give you a great feeling.  Yes, it’s the Krispy Kreme doughnut.  But, let’s face it; you don’t eat them because they are healthy.  Far from it!  You eat them because you deserve a treat or, pick a reason, it doesn’t matter.  What does matter is that Krispy Kreme seems to have forgotten who they are.  Successful retailers know who they are, they work within those parameters, and if they need to diversify, they pick products that make sense.

Making a whole-wheat doughnut that only has 180 calories?  That’s laughable!  Sure it’s great that Krispy Kreme is bringing out a new product that will generate some press, but don’t count on it boosting sales.  Healthy just isn’t ever going to be synonymous with Krispy Kreme. 

Cutting 20 calories off of a yummy treat does not constitute a health product.  Let’s compare it to some other common treats.  An apple has 65 calories, a can of beer 152.4, and a yeast glazed Krispy Kreme has 200 (according to nutritiondata.com).  At 180 calories, the whole-wheat doughnut doesn’t even make sense.  Health conscious customers aren’t stupid.

What does make sense is coffee and doughnut value deals.  Everyone makes money on value meals; McDonalds, Burger King, Taco Bell and the traditional fast food companies thrive on them.  It works, raise the average dollar per sale and profits go up.  High margins allow for discounting. 

The competition for Krispy Kreme isn’t just Duncin’ Donuts, it’s any company that sells pick-me-up treats.  Starbucks leads the pack in that department, but other coffee sellers are also competition, Dazbog, Caribou Coffee, Dunn Bros, the list is long.  New competition has also risen in the form of energy drinks.  Rockstar, Monster, and Red Bull are selling very well to people looking for the feeling doughnuts provide.  I deserve it, it feels good, and it gives me energy.

It is encouraging to see Krispy Kreme putting actions behind its desire to become more profitable.  A little more thought may be in order, but putting actions in place will at least get them some free publicity.  If sales do rise, look for success in the value deal area, not in the whole-wheat doughnut area.

Other Analyses of the Same Source Article:
Whole Wheat Donut Not Enough to Raise Krispy Kreme's Dough
March 15, 2007, Author: GLG Expert Contributor
Whole Wheat Doughnut Follows Success of Oat N Honey Doughnut
March 2, 2007, Author: GLG Expert Contributor
Still don't get it
March 1, 2007, Author: Jeffrey Segal, VP Culinary Research & Concept Development, Ops., Riese Restaurants

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