McDonald’s recently announced its plan to sell Krispy Kreme doughnuts at its restaurants nationwide by the end of 2026. This strategic partnership will see the rollout starting in the second half of the year, with Krispy Kreme doubling its distribution to meet the demands of the collaboration. Under this exclusive agreement, McDonald’s will be the fast-food partner for Krispy Kreme in the U.S. The move has already sparked investor interest, with Krispy Kreme’s shares jumping nearly 20% in premarket trading after the announcement.
Krispy Kreme’s innovative “hub and spoke” distribution model allows it to produce and distribute its doughnuts effectively. Production hubs, in the form of either stores or doughnut factories, send out freshly made treats daily to retail locations such as grocery stores and gas stations. The partnership with McDonald’s presents a significant opportunity for Krispy Kreme to expand its reach, especially since the company currently delivers doughnuts to 6,800 third-party stores as of December 31. With McDonald’s boasting roughly 13,500 restaurants in the U.S. and plans to open 900 new locations by 2027, Krispy Kreme is eyeing the opportunity to tap into a larger market. CEO Josh Charlesworth mentioned that they can service about 6,000 restaurants with their existing infrastructure, primarily doughnut shops with excess capacity.
As Krispy Kreme works towards satisfying the partnership with McDonald’s, the company is also focusing on enhancing their efficiency and productivity. By expanding their capacity, Krispy Kreme can deliver fresh doughnuts to around 7,500 McDonald’s restaurants that were previously out of reach. This growth in demand enables their production lines to churn out a higher volume with minimal additional costs. Charlesworth highlighted that this increased efficiency will not only benefit local deliveries but also improve the overall productivity of their distribution network. The long-standing relationship between the two chains began around a year and a half ago when McDonald’s piloted selling Krispy Kreme doughnuts at nine restaurants. The successful test led to the expansion of the offering to approximately 160 restaurants across Louisville and Lexington, Kentucky, which will continue during the national rollout.
Diversifying Menu Offerings
For McDonald’s, the addition of Krispy Kreme doughnuts complements their bakery and breakfast offerings. With a focus on coffee as a common drink pairing for doughnuts, McDonald’s has been streamlining other bakery items like cinnamon rolls from its menu. Customers will have the option to indulge in original glazed, chocolate iced with sprinkles, and chocolate iced cream-filled doughnuts, available individually or in packs of six throughout the day. In the long run, Krispy Kreme is now aiming to extend its reach to over 100,000 points of access globally, up from the previous projection of 75,000 locations. The brand’s doughnuts are currently available in more than 14,100 stores across 39 countries.
Market Challenges and Opportunities
Despite its expanding partnership with McDonald’s, Krispy Kreme has seen a 20% decrease in shares over the past year, resulting in a market value of $2.11 billion. Concerns have arisen among investors regarding the impact of weight loss drugs like Novo Nordisk’s Ozempic on Krispy Kreme’s sales. Similar market pressures have affected McDonald’s, although the company’s stock has risen by 2% as consumers opt for affordable food and beverages. With a market value of $201 billion, McDonald’s continues to navigate the evolving consumer landscape, leveraging partnerships like the one with Krispy Kreme to drive growth and innovation in its menu offerings.
The collaboration between McDonald’s and Krispy Kreme signifies a strategic move by both companies to enhance their market presence and cater to evolving consumer preferences. By leveraging each other’s strengths and expanding their distribution networks, both chains are poised for continued growth and success in the competitive fast-food industry.