Krispy Kreme doughnuts will be sold in nearly 2,000 McDonald’s by the end of the year, up from its previous estimate of 1,000 stores a month ago, president and CEO Josh Charlesworth said on the company’s Thursday earnings call. He reiterated the company is on track to have doughnuts available at 12,000 McDonald’s by 2026.
Next week, the doughnut chain will begin delivering the treats to restaurants in Indiana and Ohio. Those states border Louisville, Kentucky, where the partnership was first tested, and Chicago, where Krispy Kreme began delivering doughnuts to about 400 stores in October.
Pennsylvania and West Virginia will follow by the end of November, Charlesworth said, bringing the pastries to another 1,000 restaurants.
“McDonald's is supporting the launch with a comprehensive local marketing plan, including TV, social media, and out-of-home billboards,” Charlesworth said. “We expect this increased visibility to benefit Krispy Kreme brand awareness as we expand to more cities across the country.”
Most of the company’s doughnut-making facilities operate below capacity, with some making just 25% of the maximum possible volume of doughnuts, Charlesworth said.
The accelerated rollout of the doughnuts at McDonald’s and other retailers “gives us the opportunity to improve the capital efficiency of the existing production hubs,” Charlesworth said. “We also plan to open new high-volume facilities with quicker paybacks in underserved markets like Minneapolis and Massachusetts.”
Charlesworth told analysts Krispy Kreme has not seen measurable cannibalization of its sales at existing doughnut shops in the Chicago market. He added that McDonald’s customers have responded positively to the doughnuts, which fill a hole in the burger giant’s menu left by the end of its McCafe pastry lineup last year.
But the rapid expansion of Krispy Kreme’s delivered-fresh-daily network — meaning retailers and restaurants that sell its doughnuts, not delivery to individual consumers — is challenging the company’s logistics network.
As a result, CFO Jeremiah Ashukian said the doughnut company is thinking about using a third party to complete some of its deliveries to retailers and restaurants.
This would prevent Krispy Kreme from having to scale expenses like fuel or truck maintenance in conjunction with its network, Charlesworth said. Following tests of third-party logistics work, the company has put out a request for proposals from potential third-party delivery partners.
