In 2003, the U.S. doughnut industry was a $5 - $6 billion market. American households consumed an estimated 10 -12 billion doughnuts annually; this translates into over three dozen doughnuts per capita. In 2002, doughnut industry sales rose by about 13%. Sales from doughnut outlets rose by about 9%, to approximately $3.6 billion, whereas packaged doughnut sales at supermarkets, convenience stores and other retail outlets staggered in the past five years. A study by Technomic confirmed the growth of doughnut shops and identified this segment as the fastest-growing dining category in the country. Further analysis provided by the following figure shows attractiveness and profitability characteristics of the doughnut industry.
Five Forces Model of Competition
Players in the doughnut industry are: Dunkin' Donuts, Krispy Kreme, Tim Hortons, Winchell's Donut House and LaMar's Donuts. As shown on the pie chart, there is a significant difference in the market share of these competing sellers, with Dunkin' Donuts dominating with a 2002 worldwide sales of $2.7 billion, followed by Krispy Kreme and Tim Hortons, each with over $620 million in total sales. (2002 Sales for Winchell's Donut House and LaMar's not provided.)
KRISPY KREME'S BROAD DIFFERENTIATION STRATEGY
Krispy Kreme Doughnuts (KKD) projects an image as "the Stradivarius of doughnuts," creating a unique enriching experience that increasingly gains customer enthusiasm and loyalty. Krispy Kreme's melt-in-your-mouth, hot, sugar-glazed doughnuts, the "doughnut theater," and the "HOT DOUGHNUTS NOW" feature are clearly a few of the differentiating factors it attempts to make itself identified with. Fortunat...
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...crease its profit margin. This is in-line with the company's goal of expanding as a multi-national company. KKD has to keep its business model profitable to continually attract franchisees and maintain quality and consistency as it expands to other regions.
Priority weaknesses that must be addressed are its limited menu offerings and slow response to consumer's changing preferences. KKD should utilize survey methods and conduct independent research to gauge consumer interest with its products and obtain feedback on which items should be included in its menu. In response to health-conscious consumers, items that have less sugar content and more nutritional value should be considered being added to its menu. Attention should also be given to improving the quality and appeal of its beverage offerings to align it more closely with the hot doughnut experience.
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