It’s easy to dunk on some brand collaborations. Why in the heck is KFC collaborating with a bunch of hip streetwear brands? Or more to the point, why are a bunch of hip streetwear brands collaborating with KFC?.
But a new collaboration requires no head scratching at all: McDonald’s and Krispy Kreme. Late in 2022, Krispy Kreme doughnuts became available at nine McDonald’s restaurants in the Louisville, Kentucky, market. Three types of doughnuts are on offer: Original Glazed, chocolate iced with sprinkles, and raspberry-filled. These treats are available all day, as long as supplies last, sold individually or in packs of six.
The doughnuts will be delivered to the stores fresh every day, according to a joint press release put out by both companies. Notably, this pilot test follows a supply chain restructuring by Krispy Kreme, which moved in 2021 to a “hub-and-spoke” distribution system. As a result of this shift, the company can deliver fresh doughnuts daily to grocery and convenience stores, where they sell sold for the same prices as in the doughnut chain’s stores. Previously, external retailers, like grocery stores, received older products and at a discount.
So far, the experiment appears highly successful strategy. In particular, the dessert retailer could count 25 percent more points of access in 2021 compared with the previous year (i.e., there were a whole lot more places to buy Krispy Kreme doughnuts!). In addition, in cities in which it added this distribution channel, it enjoyed a 300- to 400-basis point margin increase. The McDonald’s partnership then represents a next step in Krispy Kreme’s ongoing expansion plans.
For McDonald’s, the advantages include adding a new category to its menu without creating more operational complexity or requiring new and expensive machinery. The doughnuts will be made and delivered by a well-established company with vast expertise in this market. Furthermore, adding these menu items arguably could literally drive more traffic to McDonald’s and help cement the fast-food giant’s stronghold in the breakfast market, which now accounts for about 25 percent of its business.
How long will this partnership last, and what will happen next? Good questions! In a joint press, the companies note that McDonald’s is testing out the opportunity to “help us understand how offering new bakery items like Krispy Kreme could impact operations in our restaurants.” In other words, what happens in Kentucky could spread, if we all get lucky.
Discussion Questions:
- Is McDonald’s selling fresh Krispy Kreme doughnuts likely to prove to be a successful partnership? That is, do you expect to see this concept spread to other markets, after the test in Louisville?
- What other collaborations in the fast-food environment might be effective?
- How and why did Krispy Kreme’s shift to a hub-and-spoke distribution system make its different expansion efforts viable?
- What is the advantage of a collaboration like this one, compared with McDonald’s simply making and selling its own doughnuts?
Sources: Tom Ryan, “Does Krispy Kreme Fill a Hole in McDonald’s Menu?” Retail Wire, October 24, 2022; Liz Calvario, “McDonald’s Teams up with Krispy Kreme for Test Doughnut Run,” Today, October 30, 2022; Alicia Kelso, “Here’s Why the McDonald’s and Krispy Kreme Collaboration Makes Sense,” Nation’s Restaurant News, October 18, 2022; “Krispy Kreme and McDonald’s Partner on Operational Test,” investors.krispykreme.com, October 18, 2022