Krispy Kreme Doughnuts Inc

Krispy Kreme Doughnuts Inc

Summary

In this SWOT analysis, I will delve into the strengths, weaknesses, opportunities, and threats that affect the Krispy Kreme Doughnuts Inc. Krispy Kreme is a highly successful company, whose main product, not surprisingly, is doughnuts. The company went public in 2000, and saw a hugely successful increase in share price immediately after.

Vernon Rudolph founded the Krispy Kreme company in 1937 in Winston-Salem, NC. The company has since become a leading specialty retailer. They produce over 4 million doughnuts each day, with over 1.8 billion doughnuts produced each year.

Krispy Kreme has company-owned, as well as franchised stores. They sell doughnuts in retail stores, supermarkets, convenience stores and other retail outlets. Krispy Kreme’s best-known product is the fresh, glazed, yeast doughnut, called the Hot Original Glazed. Krispy Kreme also produces over a dozen other varieties of yeast and cake doughnuts.

SWOT analysis

Strengths

Krispy Kreme’s biggest strength is in its product. It is best known for its best known for its fresh glazed, yeast-raised doughnuts, made from a secret recipe. The doughnuts are highly popular throughout North America, and have a mass appeal that is based largely on word of mouth and superior product.

Interestingly, Krispy Kreme’s doughnuts are so popular that Krispy Kreme is able to generate a media frenzy without using major or national advertising. Certainly, this is a major advantage to the Krispy Kreme company, as it greatly reduces the cost of advertising to the company.

As a result, the company saves major dollars each year in advertising, leading to increased profit margins. Certainly, the company’s superior product and strong brand identification both play a large role in their popularity, in addition to word of mouth advertising.

Krispy Kreme may be one of the few companies that is largely unaffected by both the events of September 11th, and the downturn in technology-based industries. Certainly, the appeal for inexpensive luxuries like doughnuts is known to continue even in times of economic downturns, therefore Krispy Kreme may be a strong bet for investors who are wary of technology-based stocks.

Weaknesses

Although its word of mouth marketing strategy has been successful thus far, Krispy Kreme might run into problems as it looks to expand into foreign markets. As a result, the company may need to take a different marketing approach in foreign markets.

Obviously, in a foreign market that has not been exposed to the Krispy Kreme product, word of mouth will not play an initial, or important role in advertising. As a result, most analysts agree that the further that Krispy Kreme expands, the greater that their need for mass advertising will be.

Certainly, an increased advertising campaign aimed at foreign markets will cost Krispy Kreme a significant amount of money. The company has yet to develop a large-scale, marketing strategy, so the initial development of advertising could be quite costly to the company. It remains to be seen if the company can recoup these potential losses through adequate sales in foreign markets.

Certainly, another weakness to expansion plans is that there is not much proven doughnut demand outside of North America. If this is true, it may, at the very least, limit Krispy Kreme’s expansion plans to North America, and stop proposed expansion into countries like Japan, Australia, the U. K. and Spain.

Opportunities

Certainly, opportunities exists for further expansion of the Krispy Kreme franchise. Opportunities for expansion both within the United States and abroad. Specifically, New England is the last major territory of the United States that Krispy Kreme has yet to enter. Accordingly, plans are in the works for openings in New England by the end of 2002.

In addition, opportunities also exist for Krispy Kreme to expand into the global market. Krispy Kreme opened its first store in Canada in 1989, but opportunities to expand beyond North America are still available. The company is investigating into expanding into markets like Australia, the U.K., Japan, Spain and Mexico.

Threats

Several threats exist to the continued success of the Krispy Kreme company. These include competition within both the United States and Canada, the potential that the doughnut market is saturated,