May 17, 2004

Stock Fallout

Krispy Kreme's stock has been in the toilet along with the rest of the market. Yappers on stock message boards are calling for management's heads. All because management believes the low carb craze will slow profit growth. Note that CEO Scott Livengood didn't say the company would lose money. Profits just won't meet company expectations. In the same statement, Krispy Kreme pointed out that "Krispy Kreme experienced a 26.3% increase in systemwide volume in U.S. packaged doughnuts, predominantly through the addition of new accounts, while all other brands in the doughnut category combined experienced a 7.2% decrease in volume." KK store sales continue to grow which means the low carb fad is only effecting grocery store purchases. People continue to buy Krispy Kremes. They're just not considering it an add-on purchase while buying other groceries. Instead, they consider it a treat to go to a KK store, watch dough become golden glazed goodies, and savor a hot, soft doughnut.

If you really want to know the place of off-site sales in Krispy Kreme's plans read Making Dough. It's a bit on the hagiographic side, but it does mention that the company treats sales in grocery stores, gas stations, and convenience stores as a form of marketing. KK doesn't buy commericals on television or the radio. By offering doughnuts off-site the company gives you a taste of what they have to offer. Because of word of mouth potential buyers think there has to be something more at a KK store than an above average doughnut. The well-branded displays are the closest thing the company has to traditional commericals. Once someone goes into a store to have a hot doughnut off-site sales keep that experience in the consumer's mind.

I have to mention that I asked Prof. Bainbridge for his take on the KK lawsuits. He was kind enough to reply.

"Krispy Kreme Woes Take Cyber-Focus"