Krispy Kreme leverages distribution amid inflation


As food prices rise, Krispy Kreme is leveraging its business of selling freshly baked donuts to grocers and convenience stores to weather these inflationary challenges.

In a call with analysts on Wednesday (August 17) to discuss the company’s second-quarter 2022 financial results, candy brand executives explained how the company’s hub-and-spoke strategy is mitigating the impact.

The company is leveraging its “Delivered Fresh Daily (DFD) Doors” stores, where it drops off its donuts daily to sell them at the same prices as at a Krispy Kreme store, to generate more revenue from its locations. Conversely, stores that do not have felt the effects of inflationary headwinds more strongly.

“The underperformance of spokeless hubs impacted margins this quarter,” Krispy Kreme President and CEO Mike Tattersfield said, pointing to a 400 basis point year-over-year margin decline. on the other due to inflation and promotional expenses. “In contrast, hubs with spokes saw their margin delta increase compared to hubs without spokes due to the benefit of additional offsite sales through increased DFD revenue.”

Yes, food prices are on the rise, and while many companies are absorbing some of these increases, consumers are feeling the pinch. Consumer Price Index data for all urban consumers (CPI-U) for July, released by the U.S. Bureau of Labor Statistics (BLS), noted that home food prices (c ie groceries) increased by 13% and food out of home (ie restaurant) prices increased by 8%.

Additionally, results from a national online survey conducted by PYMNTS with 3,783 consumers last month found that consumers report paying 20-30% more for retail and grocery purchases and for eating out. restaurant.

Read more: Why retailers should worry about inflation but fear the wealth effect

As a result, many consumers are reducing their food spending, reducing their purchases of non-essential foods (like, for example, a treat like a donut). According to data from the PYMNTS “Consumer Inflation Sentiment” study, drawn from a July survey of nearly 3,800 American adults, 60% of consumers have reduced their spending on non-essential groceries due to the rise prices. Additionally, only 15% said inflation had no impact on their food spending.

See more : Three in five consumers are cutting back on non-essential grocery spending

Tattersfield noted that “inflationary times” explain the value of the company’s hub-and-spoke model, showing how, worldwide, it “really allows us to generate our revenues per hub”.

Thanks to these shelves, the company’s total number of “access points” (Krispy Kreme and DFD Doors stores) exceeded 6,000 in the United States and Canada during the quarter, and the candy brand intends to continue leveraging this capex-light method of expansion to reach 10,000 access points in the region.



About: Results from PYMNTS’ new study, “The Super App Shift: How Consumers Want To Save, Shop And Spend In The Connected Economy,” a collaboration with PayPal, analyzed responses from 9,904 consumers in Australia, Germany, UK and USA. and showed strong demand for one super multi-functional app rather than using dozens of individual apps.


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