Issues that have Impacted Krispy Kreme Company and the Industry at Large
Factors affecting Krispy Kreme Company
Anderson and Stonehill (2008) noted that one of the issues affecting Krispy Kreme is its franchising mechanism that affects the supply chain. This mechanism was adopted during a period of increased growth in the company that was fostered by the Krispy Kreme Craze among consumers during the 2000’s. With the increased sales, consumers were forced to make long queues to purchase the company’s doughnuts in the major outlets. The company developed various franchises in different regions to deal with the increasing demand. However, the company later faced financial fall-out due to the increased franchises that affected the effectiveness of the supply chain. This was because the company could not pay its suppliers on time (Richard, 2000). Moreover, Schneider (2010) noted that some of the franchisees negatively affected Krispy Kreme such as in Australia where the company had to close 21 units due to poor leadership of the franchisee.
Anderson and Stonehill (2008) observed that internally, Krispy Kreme suffered from the conflicts of interest among its executive members. At one point, Krispy Kreme acquired Montana Mills for an estimated $30 million on goodwill despite the fact that the company had not documented any profits before the merger. The acquisition was associated with John Tate, the then Krispy Kreme COO who had worked at the Montana Mills Board of Directors before joining Krispy Kreme. Tate had worked for fourteen months at Montana Mills before joining Krispy Kreme and initiating the merger. In the year following the merger, Montana Mills made a loss of 2 million dollars and later closed down. Besides, Krispy Kreme allowed the senior executives to make private investments in some of the company’s franchises (MacDonald, 2005).
Factors affecting the doughnut industry in the world
IBIS World (2017) stated that increased competition among the major international doughnut chains such as Dunkin Donuts, JAB and Winchell’s is among the factors affecting the doughnut industry. During the Great Recession, doughnut companies experienced lesser sales due to the struggling economies globally. This, therefore, called for the development of new strategies to attract more consumers to the companies. One such strategy is the decision to offer a wider range of products apart from doughnuts such as coffee and iced drinks (Chavan & Nilesh, n.d.).
Yazdanseta, Babak and Maryam (2015) pointed that doughnut companies use deep fat-frying since it is a fast, energy efficient and convenient cooking method. This gives doughnuts a porous and crispy interior crust that increases its palatability. Inherent to this approach, doughnuts contain excess fat that is related to a myriad of health problems such as hypertension, cardiovascular diseases and blood cholesterol. Antonanzas and Roberto (2011) noted that about 30% and 40% of women and men respectively are overweight in the US. As such, consumers are focused on the consumption of health-oriented food materials. Doughnut companies are hence developing more health-oriented food choices that have low calories (Richard, 2000).
References
Anderson, J. R. and Stonehill, C. (2008). Lessons From Krispy Kreme. Journal of Business Case Studies. 4(4): 1-6.
Antonanzas, F. and Roberto, R-I. (2011). Healthy vs. Unhealthy Food: A Strategic Choice for Firms and Consumers. Health Econ Rev. 1: 4.
Chavan, P. and Nilesh, B. (n.d.). Market Intelligence to Develop Product and Brand Strategies for Fast Changing Market Segment. IOSR Journal of Business and Management. Pp. 44- 49.
IBIS World (2017). Doughnut Stores: US Market Research Report. March 2017. Web Retrieved on February 5, 2018 from https://www.ibisworld.com/industry-trends/specialized-market-research-reports/consumer-goods-services/food-service-drinking-places/doughnut-stores.html.
MacDonald, E. (2005, August 10). Krispy Gets Kremed. Forbes. Retrieved on February 2, 2018, from https://www.forbes.com/2005/08/10/restatement-earnings-kkd-cz_em_0810kkd.html#34d274c3e018.
Richard, M. (2000). Dollars to Doughnuts: Sweet Treats Speak Volumes About Nations Cyclical Appetite. EBSCO Host Connection. 34(22): 31.
Schneider, J. (2010, Nov. 10). Krispy Kreme Shuts 24 Australian Stores Amid Restructuring. Bloomberg, Retrieved on February 2, 2018, from https://www.bloomberg.com/news/articles/2010-11-10/krispy-kreme-shuts-24-australian-stores-after-appointing-administrators.
Yazdanseta, P., Babak, G. T. and Maryam, G. (2015). Effect of Some Hydrocolloids on Reducing Oil Uptake and Quality Factors of Fermented Donuts. Journal of Biodiversity and Environmental Sciences (JBES). 6(2): 233- 241.
