Business News

McDonald’s to sell Krispy Kreme nationwide; shares of donut maker jump

[ad_1]

McDonalds plans to sell Krispy Kreme donuts in its restaurants nationwide by the end of 2026, the chains announced Tuesday.

The rollout will begin in the second half of this year, but it will take about two and a half years as Krispy Kreme will more than double its distribution to satisfy the partnership. For the duration of the agreement, McDonald’s will be Krispy Kreme’s exclusive fast food partner in the United States.

Shares of Krispy Kreme jumped nearly 20% in premarket trading Tuesday following the announcement.

The donut chain uses a “star and spoke” model that allows it to efficiently manufacture and distribute its treats. Production centers, which are either stores or donut factories, send freshly made donuts to retail outlets such as grocery stores and gas stations every day.

The partnership with McDonald’s represents a major opportunity for Krispy Kreme to expand its reach. As of December 31, McDonald’s delivered its donuts to 6,800 third-party stores. McDonald’s has approximately 13,500 restaurants in the United States and plans to open 900 new locations at national scale by 2027.

“We think we can serve about 6,000 restaurants with our existing infrastructure, primarily donuts, which have excess capacity,” Krispy Kreme CEO Josh Charlesworth told CNBC.

Krispy Kreme has also increased its capacity so it can deliver fresh donuts to the approximately 7,500 McDonald’s restaurants it currently cannot reach.

Although McDonald’s is the main reason the company is expanding its distribution so quickly, Charlesworth said Krispy Kreme will also take the opportunity to land in grocery and convenience stores that prefer national suppliers.

“This means that the overall efficiency and productivity of our distribution network will improve significantly over time, and not just from all those local deliveries,” he said.

Additionally, Krispy Kreme donut shops typically make more sweet treats than the chain can sell. Additional demand from McDonald’s and other new customers means its production lines can produce higher volumes with little additional cost.

“Overall, growing the daily fresh delivery channel makes our system more profitable, and McDonald’s is an accelerator of that,” Charlesworth said.

The relationship between the two chains began about a year and a half ago, when McDonald’s began selling Krispy Kreme donuts in nine restaurants as a test. A few months later, the pilot had extended in approximately 160 restaurants in Louisville and Lexington, Kentucky. These first restaurants will continue to sell the donuts during the national rollout.

Demand from McDonald’s customers during testing exceeded both chains’ expectations, according to Charlesworth.

For McDonald’s, the addition of Krispy Kreme donuts helps strengthen its bakery and breakfast offerings. THE the hamburger chain leaned into coffeea common drink for donuts, but which removes other baked goods such as cinnamon rolls from its menu.

McDonald’s customers will be able to order the Original Chocolate Glazed Donuts with Sprinkles and Chocolate Ice Cream Filled Donuts, either individually or in packs of six. Restaurants will sell donuts all day.

In the long term, Krispy Kreme now hopes to reach more than 100,000 access points for its donuts worldwide, up from 75,000 previously planned. The chain’s donuts are currently available in more than 14,100 stores in 39 countries.

Krispy Kreme shares have fallen 20% over the past year, dropping its market value to $2.11 billion. As the hype around weight-loss drugs such as Novo Nordisk’s Ozempic has faded, investors have wondered whether such treatments would cut into Krispy Kreme’s future sales.

Similar concerns have dogged McDonald’s, even though its shares have risen 2% over the past year as consumers turn to its inexpensive food and drinks. The company has a market value of $201 billion.

[ad_2]

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button