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Krispy Kreme sales, traffic jump as company begins loyalty program test

Customers can sign up for the program through their iPhone or Android device and earn reward 'Treats' for future purchases. A national roll out is expected in late 2015.

December 10, 2014 by Alicia Kelso — Editor, QSRWeb.com

Krispy Kreme Doughnuts reported its Q3 results Tuesday, which included a 3.7-percent jump in domestic same-store sales and a 4.6-percent increase in store count.

There are now 925 company and franchise shops worldwide.

During the company's earnings call, CEO Tony Thompson said customer traffic rose 5.7 percent at company shops, compared to 0.8 percent in Q2. This improvement was driven by "deliberate and strategic" promotions and higher marketing spend.

Promotions during the quarter included the Sweet Tastes of The South and the pumpkin lineup, as well as National Smile Week, National Coffee Day and Talk Like a Pirate Day.

There was also the brand's Ghostbusters movie promotion in October, which marked the iconic movie's 30ths anniversary. The promotion included two marshmallow cream-filled doughnuts and provided a boost, according to Thompson. 

"The traction we gained from this out-of-the-box partnership is an example of the creativity we strive for with all of our limited-time offerings," Thompson said. "Now that we have regained traffic momentum, we are looking to balance topline growth with improved sharp operating margins."

Unit growth

The company's systemwide unit count grew 4.6 percent in Q3 and is up 11.7 percent on the year-to-date. Thompson said the objective is to open new shops in a "prudent, sustainable" way and capitalize on a "huge growth opportunity."

Much of that opportunity lies in international markets, where Krispy Kreme has added 94 openings through Q3, from its original estimation of 85 units. The company also signed a new 20-store agreement for Bangladesh and marked its debut in South America, in Bogota, Colombia.

International learnings

Thompson said as the company continues to expand its global presence, it has gleaned some learnings from those international markets for its domestic business, and vice versa.

"For example, we believe that a modified small factory store model could have significant application internationally," he said. "Conversely, we expect to capitalize on our vast experience internationally to refine the domestic hub and spoke model as we look to expand the variety of retail shops we support here in the US. This would include small shops designed to meet consumer needs and dense, urban pedestrian rich environment."

Thompson also said some menu offerings available in international markets could make their way onto US menus.

Technology investments

Krispy Kreme also announced on the call that it is increasing its technology investments to "directly engage with retail and wholesale consumers and to improve our analytical capabilities," Thompson said.

The company began testing a new consumer engagement platform last week, which includes the "My Krispy Kreme Treats" loyalty program. The test is taking place in Nashville, Tennessee, Richmond, Virginia and Michigan.

Customers can sign up for the program through their iPhone or Android device and earn reward points (called Treats) that can then be redeemed for future purchases. The test will continue for a few months before a domestic launch can be solidified, a move that is expected in late 2015.

"The other big opportunity on the technology front is enhancing our business intelligence capabilities, specifically gathering more precise and timely data to drive immediate action. Those initiatives which are in the early stages of implementation should support better decision making and improved forecast capability," Thompson said. "These initiatives are a big opportunity for us."

Beverage focus

Finally, Krispy Kreme continues to brighten the spotlight on its beverage offerings, indicated by the hire of a new VP of Global Beverage Strategy. Thompson said this new executive will be tasked with driving beverage opportunities in-store and elsewhere.  

Getting beverages to be a bigger part of the sales mix is a priority, Thompson said.

"While we are determined to increase the frequency of doughnut purchases, there is also a significant opportunity to increase the beverage attachment rate for consumers visiting our shops," he said.

The company is taking steps to increase top-of-mind awareness, which includes retail offerings such as its packaged ground coffee, ready-to-drink coffee and K-Cup lineup.

"Our beverage licensing program is geared toward building brand awareness and finding new ways to bring Krispy Kreme to more people. Longer term, as our shop footprint grows, we will become a more convenient destination and thereby earn more visits from frequent beverage consumers," Thompson said.

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