Krispy Kreme’s Problems Go Deeper Than Atkins

Jul 30, 2004

By George Anderson

Krispy Kreme has been blaming reduced levels of performance on the popularity of low-carb diets, but is there more to the story than this?

As a report in USA Today suggests that Krispy Kreme’s numbers may be down because the novelty of the sugar-drenched treats has worn off with consumers.

Skip Carpenter of Thomas Weisel Partners said, “As they built out the business, the euphoria of the brand has waned, and the product has become ubiquitous.”

Analyst John Ivankoe of J.P. Morgan Chase, a critic of the company’s growth plan, says Krispy Kreme needs to reduce the number of outlets where its products are sold.

In a separate story also reported on by USA Today, Krispy Kreme announced it is being informally investigated by the Securities and Exchange Commission (SEC) over “the company’s reacquisition of franchises and its warning in May that 2004 earnings would fall short of plans. The May announcement caused the company’s stock to plummet from the $32 range to $20 and spawned several shareholder lawsuits.”

Moderator’s Comment: What are your thoughts on what’s right and/or wrong with Krispy Kreme and where the company and brand should go from here?

We’ve been pretty consistent over the years with problems we’ve seen for Krispy Kreme. Here are some highlights.
George Anderson – Moderator

“Is Krispy Kreme overextending itself?”

RW 11/27/02, That’s How The Krispy Kreme Krumbles

“The biggest obstacle to Krispy Kreme’s success is the risk of it becoming ubiquitous. The brand’s scarcity made it a prized purchase. Will that go away
when consumers can get it anywhere?”

RW 6/25/03, Krispy Kreme Opens New Market

“Our concern with Krispy Kreme has always been that it would lose much, if not most, of its cult-like appeal if product became ubiquitous in the market.”

RW 9/16/03, Is Krispy Kreme Kracking?

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