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Krispy Kreme focusing on coffee

Krispy Kreme Doughnuts Inc is working harder to promote its coffee, according to a Bloomberg report. The 78-year-old doughnut chain is having slower sales growth and more demanding customers.

December 18, 2015

Krispy Kreme Doughnuts Inc is working harder to promote its coffee, according to a Bloomberg report. The 78-year-old doughnut chain is having slower sales growth and more demanding customers.

The company opened a test store about two months ago in Clemmons, North Carolina, where workers are learning to make lattes and cappuccinos. The store has free Wi-Fi and a large mural of coffee behind the register. There's also a chalkboard sign that says "Know Your Coffee.”They're also calling themselves baristas, the report stated.

Coffee could make up 10 percent of restaurant sales in the U.S., up from just 5 percent now, Krispy Kreme CEO Tony Thompson told Bloomberg. Krispy Kreme had about $660 million in systemwide sales from its company-owned and franchised domestic stores in the last fiscal year.

Earnings have missed analysts' estimates in six of the past eight quarters, the report stated, and Krispy Kreme is trying to recover from some setbacks. The brand could use the positive impact on profit with higher coffee sales, which carry a higher margin than baked goods.

Krispy Kreme reduced discounts over the past year. Some customers did not come back as a result. Sales of its doughnuts at grocery and convenience stores are also down. Additionally, the stock has lost 24 percent in 2015, compared with a 0.7 percent gain for the Standard & Poor's 500 Index, the report stated.

In 1973, Krispy Kreme had built its fleet of shops to 60 locations. However, by the early 2000s, it had expanded too fast and started closing some locations. In 2011, the doughnut chain introduced a new line of coffees in 2011. It also gradually added espresso-based drinks to the menu too. Thompson, a former Papa John's International Inc executive, became CEO in June 2014.

Dunkin' Brands Group Inc gained a reputation for iced coffees and other drinks after starting with doughnuts, and Krispy Kreme is attempting a similar strategy, the reported stated.

Dunkin' Donuts and Starbucks, however, have thousands of locations across the country. Krispy Kreme has fewer than 300 U.S. stores, and many aren't in commuter-friendly areas, Michael Halen, an analyst at Bloomberg Intelligence, stated in the report.