money Krispy Kreme releases hand-cut, higher-priced donuts amid global expansion plans
Krispy Kreme (DNUT) customers are willing to pay up for premium doughnuts, according to the chain's CEO.
"Hand-cut doughnuts is actually something that our consumers are really looking for — we've seen that," CEO Mike Tattersfield told Yahoo Finance Live (video above). The same goes for Krispy Kreme's other higher-priced innovations, such as the Twix Bar donut and the upcoming launch of an apple fritter.
"There's a lot of really interesting innovation," Tattersfield added. "Are consumers always going to be realistic? If it's worth it, they're going to come to us."
One example where the Charlotte-based donut chain is seeing demand is with its cinnamon rolls which are exclusively sold on Sundays.
"It has a big take," Tattersfield shared. "It is sometimes 50% more than any other doughnut that we have."
In an earnings call with analysts on Wednesday morning, Tattersfield noted the team learned from the cinnamon roll launch by "getting to what we call our fourth-tier pricing." Should consumers remain resilient in the face of higher prices, Tattersfield said, the company could try to expand its fourth-tier offerings.
"We still try to be very affordable on this, but there's clearly an opportunity to continue to put premium into our brand while we still try to maintain that kind of base price per dozen and try to drive that across the world," he said.
As in previous quarters, Tattersfield stressed that another advantage the brand has is the "infrequent" nature and seasonality of its products, especially with the holidays right around the quarter.
Krispy Kreme doughnuts are "gifted a lot," he said. "So when the seasonality comes in, like in October for Halloween or something in the holidays as well, it is clearly where you see sometimes gifting is a box of Krispy Kreme."
The brand is already taking advantage of pumpkin spice season, which kicked off in early August.
Brand awareness ‘is exceptionally high’
Despite efforts to bring in customers with ongoing promotions, such as the Beat the Pump campaign that priced a dozen doughnuts to match the cost of a gallon of gas, the company posted a miss on earnings and revenue in the most recent quarter. The company said foreign currency transactions resulted in a negative 2.6% impact on net revenue growth due to the strength of the U.S. dollar.
Shares of the company are down nearly 12% year to date.
Still, Krispy Kreme has another thing going for it, Tattersfield said — its logo.
"One thing that's pretty neat is the brand awareness of Krispy Kreme is exceptionally high," Tattersfield said. "Consumers travel all over the world, and they've engaged our brand, whether it's England, whether it's Japan, whether it's in Singapore, whether it's in Mexico or Canada."
He added that the hub-and-spoke business model is "very attractive to franchise owners" across the globe. The model consists of franchise owners opening new locations that act as "hubs," which can then expand their business by supplying other locations and grocery stores (the "spokes") with freshly baked doughnuts.
With the model, Tattersfield shared that both Main Street and Wall Street alike can expect "even more news" on global growth. The company announced its "biggest development agreement in Turkey" alongside earnings results on Wednesday.
Brooke DiPalma is a producer and reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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