Why Krispy Kreme is 'hot now'

Amid takeover speculation, the doughnut maker adopts a 'poison pill' and sets upon an ambitious expansion path.

By Aimee Picchi Jan 16, 2013 5:30PM

Credit: Bruno Vincent/Getty Images
Caption: Krispy Kreme neon signKrispy Kreme (KKD)'s doughnuts aren't the only things that are hot at the company. The stock price has jumped 64% in the past year. 

The stock surge has come amid speculation that Krispy Kreme could get gobbled up by a larger company, and marks a big turnaround from where the doughnut maker was a decade ago.

On the heels of the takeover speculation -- and a "poison pill" strategy to deter a hostile takeover -- Krispy Kreme is embarking on a new plan to entice investors: It's planning an ambitious store rollout that will boost the number of outlets by 71%, reports Bloomberg.

Known for its "hot now" neon signs that light up when the doughnuts are ready, Krispy Kreme wants to deliver its deep-fried goodies to about 400 new locations. Most of those will be outside its Southeast base, according to the report. 

The expansion is a recipe from chief executive James Morgan, who was tapped to run the company in 2008 after Krispy Kreme hit upon hard times. 

The doughnut company wowed investors with its 2000 initial public offering, when the stock was a darling of both retail and institutional investors. With demand high for the stock, shares surged to almost $50 in 2003. 

But the stock soon grew stale. Amid franchisee bankruptcies and downward sales, Krispy Kreme was at risk for getting delisted from the New York Stock Exchange, and traded for as low as a buck and some change in 2009. 

Under CEO Morgan, the company has made a slow and steady comeback. While doughnuts are still its bread and butter, Krispy Kreme has added fruit-based drinks and specialty doughnuts such as the double dark chocolate doughnut, which is available through Feb. 17 at some stores. 

He's also reached out to younger, tech-savvy consumers, creating iPhone and Android apps that deliver the "hot now" doughnut sign alert to smartphones when local stores have fresh goodies. 

Krispy Kreme is also benefiting from an American trend to seek out smaller meals instead of spending as much as $30 at chains such as Applebee's, restaurant consultant John Gordon told Bloomberg

Still, Krispy Kreme has room to grow: The company's U.S. market share is only 2.1%, compared with 25% for rival Dunkin' Brands Group, according to data from IBISWorld cited by Bloomberg.

More on Money Now

Jan 16, 2013 5:55PM
Jan 16, 2013 6:44PM
i was raised where Krispy Kreme got its start and we love them.  they are lighter and fluffier than Dunkin Donuts, or the other competitors.  Take them hot or a day old. Either way they are goooood.
Jan 16, 2013 6:32PM
wish they would expand in Japan, there is so few here but the line to wait for them is ridiculously long ! Plus the locations far and few between.

Kick out the crappy MR DONUGHTS chain that we have in Japan and replace each one with a Krispy Kreme please LOL

Jan 16, 2013 7:45PM
they sold a million donuts on grand opening in tuscaloosa
Jan 17, 2013 10:12AM

"Krispy Kreme wants to deliver its deep-fried goodies to about 400 new locations. Most of those will be outside its Southeast base, according to the report."


Doughnuts are cooked by floating on top of hot oil.  They are not "deep fried."  You must be thinking of fast-food chicken and okra.   

Jan 16, 2013 11:55PM
Yea, that's what Americans/the world  need...more donuts. Krispy Kreme
Jan 16, 2013 6:24PM
Krispy Creme was in Minnesota some years back but pulled out completely.  I think if they stuck to the donut factories and started out slowly, they could make it work again.   People going to convenience stores are just looking for something fast and cheap-  the margins aren't there for a premium product.
Jan 16, 2013 6:37PM
I am glad the company is doing better (remember them in Minnesota some years back - they flopped - too sweet donuts.  Anyway - you got to sell a shed-load of donuts to make a profit and these donuts don't stand up to say the likes of Dunkin Donuts.
Jan 16, 2013 6:16PM
I tried Krispy Kreme once about 10 years ago and never been back. The problem is the way they make them, its all automated and every doughnut they make is exactly the same, bland and over sweet. Great doughnuts are done by hand and each one is different but the same. As for Krispy Kreme's "Hot Now" sign I have yet to see one on,  I drive past 5 or 10 of their stores daily, most of the time you only see 1 person there and they are behind the counter. Its time for this has been to close its doors.
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