Partnership Hits a Roadblock
Krispy Kreme’s ambitious partnership with McDonald’s, aimed at selling its doughnuts in all of McDonald’s U.S. locations, has faced significant challenges. The doughnut chain has decided to temporarily pause its rollout after reaching 2,400 locations, far fewer than initially planned. This setback has led to a 25% drop in Krispy Kreme’s stock after the earnings release on Thursday.
Reassessing the Deployment
Originally, Krispy Kreme and McDonald’s intended to have the sweet treats available at all 13,000 U.S. McDonald’s restaurants by 2026. However, Krispy Kreme announced that the hiatus will allow it to work towards a more profitable business model for both companies. No additional McDonald’s will be added to the partnership in the second quarter of this year.
Challenges for Both Companies
The collaboration began in Kentucky in 2022, eventually expanding to other states. McDonald’s had previously reported that consumer excitement and demand exceeded expectations, which encouraged the partnership’s expansion. However, the fast food landscape has shifted, with McDonald’s experiencing its worst quarter since the pandemic and facing reduced consumer spending. At the same time, Krispy Kreme’s stock has lost 73% of its value over the past year, forcing the company to take drastic actions.
Focus on Profitable Growth
In response to these challenges, Krispy Kreme announced that it would discontinue dividend payouts to its shareholders, saving around $6 million per quarter. CEO Josh Charlesworth emphasized the need for Krispy Kreme to focus on improving operations, paying down debt, and pursuing sustainable growth moving forward. The company remains committed to its long-term strategy, especially in the U.S. expansion and partnership with McDonald’s, despite these current setbacks.
