When you think about movies, you think about popcorn. When you think about baseball, you think about sunflower seeds or a hot dog. When you think about a sweet treat in the morning, you probably think about doughnuts.
And if and when that particular craving hits, you probably look for the closest Krispy Kreme (DNUT) -), which has been serving the nation's premier doughnuts since its founding in 1937.
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Krispy Kreme has ventured into several other (namely sweet) offerings. If you take insulin spikes with your coffees in the morning, chances are, it's got something for you.
Its menu mostly consists of breakfast foods. Though its stores are usually open from the wee hours of the morning into the late hours at night, it mostly caters to a breakfast-loving clientele familiar with its signature sweet offerings.
There's not a ton of variety from store-to-store, and Krispy Kreme knows you don't have to get inventive to be successful. Most locations offer the following, occasionally with some variance or seasonality:
- Cake donuts
- Glazed donuts
- Iced donuts
- Filled donuts
- Chocolate donuts
- Iced coffee
- Hot coffee
- Frozen lattes
- Chillers
- Hot chocolate
- Shakes
That's what you get. It's simple, it's straightforward, and it's popular.
Krispy Kreme knows what people like, and it plays the hits. No experimentation, no frills, no fanfare. You can be sure that when you see one of those signature white boxes, no matter where you are or what time of the day it is, you're going to get a quality doughnut that doesn't mess around.
Krispy Kreme looks to detach from another sweet company
Which might explain why Krispy Kreme is planning to divest itself from a popular but less-doughy stake in a familiar business.
According to a newly-released report for Krispy Kreme investors, the doughnut chain will be exploring "strategic alternatives," for stake in Insomnia Cookies.
Insomnia Cookies, or simply "insomnia," as it's known for short, is a hugely popular warm cookie delivery shop, typically open very late and nearby to large college campuses and other hangouts with high levels of late night foot traffic. It sells inventive and novel cookie flavors that change regularly, including French toast, caramel apple, vegan cold brew latte, and chocolate caramel pretzel. It also offers other baked goods for pickier eaters, including vegan options and brownies.
Krispy Kreme has had a majority stake in Insomnia Cookies for five years and has witnessed incredible success. It weathered the pandemic when schools and bars shut down. It helped to grow its total locations from 135 in 2018 to 231 by the end of 2022. It saw a revenue increase of 24% in Q4 2022 and is planning to expand its shops into Canada and the U.K.
It's also seen great success with its online presence, which Krispy Kreme itself has been trying to grow. 45% of Insomnia Cookie's revenue comes from online orders.
“We acquired a majority stake in Insomnia Cookies to build our e-commerce and digital capability as well as assist Insomnia’s U.S. and International expansion. Both efforts have been successful and it’s time for the next strategic step for both companies,” Krispy Kreme CEO Mike Tattersfield said in a note to investors.
“Krispy Kreme has expanded rapidly through our capital light omni-channel model, and the brand is now in 37 countries selling fresh doughnuts through nearly 13,000 points of access daily,” he added. “Looking ahead, our goal is to expand to more than 75,000 points both by entering 3-5 new countries each year and developing new channels like quick service restaurants.”
Krispy Kreme hired Evercore and Morgan Stanley (MS) -) to assist with the divestment.
As recently as the Q4 2022 earnings call, Tattersfield had been heralding Insomnia as a success.
"We truly believe Insomnia Cookies will be the next Krispy Kreme," he told analysts on the call.
Now, though, it's time for Krispy Kreme and Insomnia to say goodnight.
Insomnia CEO Seth Berkowitz will remain at the helm.
"We are now a sizeable multi-channel enterprise but still have a huge runway ahead," he said, adding, "I look forward to leading our Insomniacs in our next phase of significant domestic and global expansion."
