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Krispy Kreme's strategy includes becoming a beverage destination

The company plans to test a loyalty program by the end of this year.

September 11, 2014

Recently-named CEO Tony Thompson provided an overview of Krispy Kreme's financial performance in the second quarter this week. On an earnings call, he said millennials are "critically important" to the brand and said the company is working to drive "doughnut-use occasions through social media and related marketing, limited time offers and fun activities" to appeal to this demographic.

For example, in Q2, the company hosted its 77th birthday celebration and introduced LTOS such as brownie batter, banana pudding and carrot cake doughnuts.

These initiatives, Thompson said, drove Krispy Kreme's systemwide domestic same-store sales growth of 2.8 percent in the quarter, including a 1.1 percent increase at company-owned shops, and a 3.8 percent increase at franchised shops. The strategic promotional incentives also contributed to an increase in traffic, and the brand has more occasions in the pipeline to close out the year.

"Traffic is the lifeblood of your business in a retail environment. So that was the objective, we've got a great things planned for the balance of the year from a marketing standpoint, new products that are going to certainly be exciting, I think, and add to the bottom-line and help us on the margins," Thompson said.

Beverages in focus

In addition to creating more doughnut-use occasions, the company is also focused on accelerating its beverage platform. Thompson said he wants coffee and other specialty drinks to play a larger role in the total sales mix.

As part of that goal, Krispy Kreme is currently testing frozen lattes and is also testing packaged ground coffee at Sam's Club. Ready-to-drink coffees are also now available at more than 1,000 Walmart locations, and during Q2, the company began offering Krispy Kreme K-Cups at grocery retailers, in its shops and online. Thompson said they are pleased with the results so far from the single-serve launch.

"We view these three initiatives- bagged, ready-to-drink, and K-Cup – as part of a long-term opportunity to capitalize on the large number of consumers who already brew coffee at home and at work, and want a convenient way to enjoy Krispy Kreme coffee," he said. "We have only scratched the surface in capitalizing on our beverage opportunities … Our new-term focus is we will become more accessible as a destination and for more frequent beverage users."

Loyalty program test planned

Also from the earnings call, Thompson admitted that the company is behind in its technology initiatives and is working on developing tools to improve its operations and sales data insights. This includes the building of its first digital loyalty program and "related consumer-facing technology." Krispy Kreme will begin testing its loyalty program in a handful of company-owned shops by the end of this year.

Because of its fledgling stages, Thompson wouldn't share more details about the program, including whether or not it supported mobile payments, but he did say the company is working with VML and NCR.