Krispy Kreme Doughnuts Inc.
The Doughnut Industry
The U.S. doughnut industry was a $5 to $6 billion market in 2003 2004 with a robust growth rate of 13%. Doughnut specialty stores were the fastest growing dining category in 2002 2003 with sales increases of 9% to approximately $3.6 billion. Opportunity for expansion in North America and globally is desirable. Doughnuts appeal to many people across all ages and demographics. The increasing rate of obesity and the concern about healthy living triggers a change in buyer demand toward a more health conscious diet.
The doughnut industry consists of few major competitors which are Dunkin' Donuts ($2.7 billion ), Tim Hortons ($651 million ), Krispy Kreme Doughnuts Inc. (KKD) ($665 million ), Winchell's Donut House and a large number of smaller, independent doughnut shops, including neighborhood bakeries/doughnut shops and bakery departments in supermarkets. (See Figure 1)
Major players in this industry rely heavily on franchising and royalties' fees paid to the parent companies. Most companies are retailers selling directly to end-users. Some i.e. KKD also use other channels for distribution of their product.
Price competition among rivals is close to nil, industry participants are very competitive when it comes to product differentiation. Product offerings to satisfy consumer demands include a variety of coffee, juices, muffins, bagels, cookies, cream cheese sandwiches, soups and other miscellaneous items.
The Competitive Environment Competitive Success
Rivalry among competing sellers can be classified as strong. Competing sellers are constantly offering a broader product selection to dissuade competition for example Dunkin' Donuts' introduction of bagels and cream cheese sandwiches to protect against the pressure of Starbucks, Tim Hortons' expansion of the lunch menu, and KKD's acquisition of Digital Java to be able to compete in the coffee segment.
The threat of new entrants is moderately strong. Incumbents do not strongly contest entry of newcomers, but existing industry members are consistently looking to expand their geographic reach and offer a broad product assortment. Brand awareness and customer loyalty are high and greatly important i this industry.
Substitute products for doughnuts are readily available including other baked items i.e. bagels, muffins, healthier food alternatives such as sandwiches, yoghurt, fruit and other comfort food for example ice cream and chocolates. The cost for consumers to switch is low.
The bargaining power of suppliers is very low. Major players are vertically integrated for example KKD is producing their own equipment while others are partnering up with suppliers.
In general the customer bargaining power is low and therefore it raises the potential of market's profitability. Though, most of the companies provide "buy-backs" and price protection that lessens the chance to cash on moderately strong manufacturers position.
Degree of Rivalry - Very High to Intense – Multiple competitors, high strategic stakes, innovation often easily imitated, and low switching costs for consumers
This company is known to be a monopolistically competitive, because there are still many firms and consumers, just as in perfect competition, but they still have control over what price they charge in their company, because Ben and Jerry's ice cream is differentiated from the other ice cream companies and they provide a lot of non price competition which will be mentioned later in the paper.
The chief element of Krispy Kreme's strategy is to deliver a better doughnut and to appeal to customers in new ways. They have taken great steps to insure customer satisfaction from the use of their proprietary flour recipe to their automated doughnut making machines. They have chosen to target mainly markets with 100,000 households. They also were exploring smaller-sized stores for secondary markets.
The Dunkin brand has two major companies Baskin Robins and Dunkin Donuts. For this business analysis I will be focusing in on Dunkin Donuts of the Dunkin Brand. Dunkin Donuts is one of the leading companies in the coffee industry that is growing rapidly each day. Though the coffee is rapidly increasing, can Dunkin Donuts keep up and compete with top rivals?
This memo contains the answers to Questions 1 through 4 from the International Marketing assignment titled, "Krispy Kreme Doughnuts Going Global?" The questions are offset in the shaded area and the answers are provided below each question.
Examination of the eight factors of rivalry intensity shows a number of competitors with many of them producing very similar product lines.
If competitors offer equally attractive products and services, then one will most likely have little power in the situation, because suppliers and buyers will...
clients as much as possible with one stop is a sure draw for modern American consumers. Aside from breakfast there are not many who consider doughnuts as a full meal, it is generally considered a desert or at most a snack. Thus Krispy Kreme is faced with the problem of offering a greater variety of meals to suite lunch and dinner, or changing the way America perceives doughnuts to increase sales in existing markets.
President and Chief Executive of KremeKo, insures the public that they think long and hard before the considering expansion. He said, “Krispy Kreme doughnuts won’t suddenly become available everywhere because we don’t think that’s appropriate for the brand at this juncture in its evolution in the marketplace” (Krispy Kreme Steps up Wholesale Business in Canada, 2003,)
Dunkin’s Donuts is a very positive addition to the business spectrum of Honeoye Falls however, there is a visible negative facet. For the past ten years, my town has had a tiny coffee shop that struggles to get customers through the door. It’s an unofficial landmark and is owned by a local family. My heart is always stuck with the family-owned businesses as I grew up in one myself. As the construction continues, we can only hope that the local underdog shop can figure out how to stay on the same competitive level as the big shot that has recently moved into
Markets have four different structures which need different "attitudes" from the suppliers in order to enter, compete and effectively gain share in the market. When competing, one can be in a perfect competition, in a monopolistic competition an oligopoly or a monopoly [1]. Each of these structures ensures different situations in regards to competition from a perfect competition where firms compete all being equal in terms of threats and opportunities, in terms of the homogeneity of the products sold, ensuring that every competitor has the same chance to get a share of the market, to the other end of the scale where we have monopolies whereby one company alone dominates the whole market not allowing any other company to enter the market selling the product (or service) at its price.
Much of the target market will be business people who earn between R36 000- R400 000 per year. Target Markets earning less than this may not have as much disposable income to spend on Dunkin’ Donuts products. More inexpensive products should be available for secondary target markets with less purchasing power.
According to Miller, a monopolistic competition is, “a market situation in which a large number of firms produce similar but not identical products. Entry into the industry is relatively easy” (2012, p. 556). The most important characteristic of monopolistic competition includes features such as, having a significant number of sellers in a highly competitive market, differentiated products, sales promotion and advertising, and easy entry of new firms in the long run. Accordingly, Chamberlin defined monopolistic competition as, “a market structure in which a relatively large number of producers offers similar but differentiated products” (Miller, 2012, p.
According to IBIS World Report the major players in the US coffee and snacks retail market are Starbucks and Dunkin’ Brands at 36.7% and 24.6% market share respectively with other competitors occupying the remaining market share of 38.7%. The industry is at the mature stage of its life cycle, has low barriers to entry and intense competition and rivalry between the players. The regulation and technological change within the industry is medium (IBIS world report)