Krispy Kreme and McDonald’s are Expanding their Relationship
Krispy Kreme and McDonald’s are in “advanced discussions” to expand their relationship, Krispy Kreme said in its third quarter earnings call on Thursday. McDonald’s began testing the sale of three different types of Krispy Kreme doughnuts at nine participating locations in the Louisville, Ky., market last fall. Earlier this year, McDonald’s announced an expansion of the pilot to 160 locations in Louisville, as well as nearby Lexington, Ky. For a limited time. Now, both companies are exploring further options.
“Regarding McDonald’s, nothing has been finalized but the opportunity to expand DFD through existing and new channels including QSR is clear,” new CEO Josh Charlesworth said during Thursday’s earnings call. “We are discussing the potential for an expanded partnership with McDonald’s in the US….The nature of ongoing conversation with McDonald’s [surround] ongoing analysis and discussions covering the operational execution, making sure the doughnuts are always arrive at the right time, [have the] right quality, understanding the requirements that would be needed to scale beyond Kentucky and of course, the commercial viability of the whole thing.”
Currently, at McDonald’s drive-thru locations, customers can choose from Original Glazed, chocolate iced with sprinkles, and chocolate iced Kreme-filled, and can order them all day in-store, at the drive-thru, via delivery or on the McDonald’s app.
As Krispy Kreme continues to look toward unconventional means of expansion through DFD (delivered fresh daily) doors and windows in grocery stores, convenience stores, and drive-thru lanes, ramping up these types of partnerships make sense. Charlesworth said that over time, the company will be able to expand selection at DFD doors, as well as the scope and scale of these partnerships.
“Our confidence in the US DFD opportunity, including now QSR, has grown,” he said. “It’s such that we’ve decided to thoughtfully start making additional investments. We’re just getting going, but those investments will be around manufacturing capacity to support scale growth.”
Krispy Kreme also mentioned—but did not go into much detail on – the previously announced exploration of a sale of Insomnia Cookies, which the company acquired five years ago.
“One of the key things that we really looked at is, how do we capitalize on the delivery and e-commerce capability of [Insomnia] and then, how do we help that brand start to expand itself and get scaled in the US and potentially outside of the US,” outgoing CEO Mike Tattersfield said.
“They have a tremendous growth story. Krispy Kreme has a tremendous growth story in front of us. The reason to look at strategic alternatives is to just explore and enhance that growth potential that we have there. So that’s why the timing is right and why we chose this today.”
Throughout the quarter, Krispy Kreme remained focused on expanding global points of access — including access in new countries like Switzerland and Kazakhstan — as well as menu innovation and continued external partnerships, like the M&Ms doughnuts released last quarter.
Krispy Kreme’s net revenue grew 7.9% to $407.4 million and global points of access increased by 14.4%, led by U.S. growth across all segments, including DFD doors, doughnut shops, an ecommerce. The company reported a net loss of $40.3 million for the quarter or a net loss of $0.24 cents per share compared with a net loss of $11.8 million or a net loss of $0.08 per share the same quarter in 2022, primarily due to tax expenses.