Dive Brief:
- Krispy Kreme sold a majority ownership stake in Insomnia Cookies to Verlinvest and Mistral Equity Partners for $127.4 million, the company said Monday. It expects to receive an additional $45 million in the near future following Insomnia Cookies’ refinancing of intercompany debt.
- The transaction, which completed on July 17, represents $350 million in total enterprise value, double what it was when the chain bought a majority stake in 2018, according to the press release.
- Krispy Kreme said it will use the proceeds of the sale to focus on its doughnut business, expand availability and pay down debt. It will maintain a 34% minority stake in Insomnia Cookies.
Dive Insight:
Under Krispy Kreme, Insomnia Cookies had been growing. Krispy Kreme used its hub and spoke model, in which a large bakery services smaller stores or retailers, to expand the cookie chain. This model was first deployed in the U.K. and Australia and more recently in the U.S., where several markets saw increased profitability as more points of access were added to existing hubs, CFO Jeremiah Ashukian said during a February earnings call. In 2023, sales per hub were up 8.9% year-over-year, he said.
At the end of the first quarter, Insomnia had 277 cookie global bakeries, an increase of about 16% compared to 239 during the quarter ending April 2, 2023, according to an earnings release.
Krispy Kreme began considering a sale of Insomnia Cookies last year. The doughnut chain has been accelerating growth and expects to have its doughnuts in 33,000 points of access by 2026, up from about 14,000 at the end of 2023, driven by existing and new customers in addition to expansion into new markets, CEO Josh Charlesworth said during a May earnings call.
Krispy Kreme expects to add 15,000 points of access in the U.S. by the end of 2026. Much of that will come through its partnership with McDonald’s, which will add 12,000 points of access. The two companies expanded their partnership nationwide earlier this year following a successful trial in Kentucky.
Charlesworth said the expansion of its McDonalds deal will allow Krispy Kreme to expand its distribution network, giving it greater ability it to reach retailers like Walmart, which sells Krispy Kreme doughnuts at roughly 25% of locations, and Target. The company plans to expand into Germany and Brazil this year, following its entry into France, and wants to enter three to five markets new markets per year, Charlesworth said.
