Krispy Kreme: Hot light
In March 2021, with U.S. health officials struggling to convince millions of reluctant Americans to get vaccinated against the COVID-19 contagion, iconic doughnut maker Krispy Kreme sweetened the pot. Any customer with a valid vaccination card was offered a free glazed doughnut “anytime, any day, even every day” for the remainder of the year.
The press release, issued on BusinessWire, triggered a national news cycle that underscored the “Joy of Krispy Kreme” marketing campaign and the company's efforts to support its customers and employees during the pandemic. With Krispy Kreme finalizing a six-year corporate turnaround, the publicity also set the stage for a $500 million initial public offering.
“We believe our consumers’ passion for the Krispy Kreme experience, combined with our expertise in innovation, provide us with unique opportunities to efficiently create major media-driven events," the company said in a stock offering prospectus published in June. "For example, our recent promotion gifting doughnuts to individuals who received a COVID-19 vaccination resulted in over seven billion earned media impressions."
Seven billion earned media impressions.
The hot light was on.
An initial public offering, or IPO, involves selling stock in a company -- shares of ownership, literally -- to investors. For the business, an IPO is an opportunity to tap into capital -- money -- to fund expansions, pay down debts and cash out founders and early investors. For public relations, an IPO involves publicizing highly regulated communications with investors, and managing a media spotlight that comes with it.
Down to business
Krispy Kreme was founded in 1937 in Winston-Salem, N.C.., when entrepreneur Vernon Rudolph began flash-frying the iconic glazed doughnuts in a shop across from Salem College. As the story goes, Rudolph cut a hole in the wall of the bakery to serve hot doughnuts to people walking by, and what would eventually become an international franchise was in business.
Over the decades, Krispy Kreme standardized its production system, invented the patented doughnut-making equipment installed in its stores, and opened franchised locations across the U.S. Southeast. The company was eventually sold to supplier Beatrice Foods Co. in 1976, only to be bought back by longtime franchisees six years later, and taken public for the first time in April 2000.
That's where the official Krispy Kreme history ends, at least in the corporate version posted online. Five years after that initial IPO, Krispy Kreme was struggling with hundreds of millions of dollars in debt used to finance its international and wholesale expansions, and a securities class action lawsuit seeking billions of dollars in damages.
By 2005, Krispy Kreme was bankrupt.
A new executive team quickly began cleaning up the mess. Focusing on "three S's" -- survival, stability and sustainability -- CEO Daryl Brewster engineered a turnaround that tapped into Krispy Kreme's reputation for making a great doughnut and engaging with local communities through FUNdraisers.
"I come from a background in marketing and general management, so it’s a little like an ad campaign," Brewster said in a Deloitte study published as sponsored content in the Wall Street Journal. "Companies spend an enormous amount of time finding the right message for their customers. But we often need the same thing for our employees, particularly if they’re going through a difficult challenge."
The strategy worked. The once-bankrupt company was sold to JAB Holding Co., a private equity firm that also owns Keurig, for $1.35 billion in 2016. This past June, the parent company sold 29.4 million shares of Krispy Kreme stock to investors, raising $500 million in the IPO transaction that values the company at $2.7 billion. Offered at $17 a share under the DNUT ticker, the stock surged more than 23% on the first day of trading.
In the offering documents filed with the Securities and Exchange Commission, Krispy Kreme credited its marketing communications strategy for driving both brand loyalty and sales. The company's paid media is 100% digital, with a social media presence across Facebook, Instagram, Twitter, YouTube, Tik Tok and Pinterest. Krispy Kreme has an online following estimated at nearly 10 million, and says consumers engage with its online posts nearly 20% more than its nearest competitor in what it calls "the global indulgence market."
"Earned media is also an important part of our media mix," the company said. "We create promotions and products that attract media outlets to our brand. Through the widespread dissemination of our programs through pop culture, entertainment and news outlets we believe we are able to achieve attention disproportionately large relative to our spend in a media environment populated by brands with far larger media budgets."
By the numbers
What exactly do 10 million online followers, 20% higher engagement rates and those seven billion media impressions from a well-timed jab campaign add up to for the business? Everyone knows Krispy Kreme, right? The Hot Light in the window. The glazed production line behind the plate-glass window. Paper hats for the kids. At its peak in early 2013, more than nine in ten consumers would say they had heard of the Krispy Kreme brand, according to YouGov BrandIndex online polling data.
By October 2019, with the pandemic on the horizon, brand awareness for Krispy Kreme had declined to about 80%, and was trending steadily downward. While Krispy Kreme was cleaning up its financials, the company from a brand perspective was becoming less relevant among its core market of indulgence consumers.
Why? On any given day, about one in ten people would say they heard or saw something positive about Krispy Kreme. On the chart below, that's positive Buzz. On the flip side, about three in ten saw or heard something negative about the company, and that negative Buzz had been gradually diminishing over the years. Net-net, before its digital marketing push, the Krispy Kreme brand was falling off the screen.
The hot light was off.
In the months leading up to to the IPO, Krispy Kreme deployed online media and publicity to get back into that media spotlight and burnish the company's reputation. On average, about 40% of American consumers now have a positive impressive of the iconic doughnut shop. That percentage has been ticking up steadily in recent years.
The Krispy Kreme brand also seems to be benefitting from a decision by competitor Dunkin’ Donuts in early 2019 to drop donuts from its name and rebrand as a “beverage-led” company. Since that rebranding, Dunkin’ top-of-mind name recognition has dropped below Krispy Kreme, although Dunkin’ has maintained a larger customer base and significantly higher purchase intent. Business for both brands also was affected by the COVID-19 crisis, which reduced their indulgent customer base by 30% at the height of the economic lockdowns.
A tactical PR roadmap
Communications has been credited as a key ingredient in Krispy Kreme's recent success. In its stock offering prospectus, the company cited 38 billion media impressions generated last year as proof of a "passionate" consumer base that purchased 1.3 billion doughnuts in 30 countries through the iconic Hot Light Theater Shops, along with retail partnerships, and e-commerce and delivery operations.
The prospectus, formally known as the Securities and Exchange Commission Form S-1 Registration Statement, is produced largely by investment bankers and legal teams. The highly specialized document typically contains detailed discussions about the company's financial performance, ownership structure business strategy, and potential risks.
For marketing and PR, the Management's Discussion and Analysis section doubles as a a handy roadmap for aligning communications tactics to business strategies. In the case of Krispy Kreme, for example, the company's key strategic goals in the wake of the IPO and corresponding PR opportunities include:
Increase sales: The average customer visits a Krispy Kreme shop less than three times a year. Linking new product launches with topical events -- a classic PR publicity play used by Krispy Kreme -- will increase consumption and brand engagement, the company said.
Expand in new and existing markets: Take a look at Krispy Kreme's social media feeds. Shared content typically generates responses from customers begging for a Krispy Kreme closer to their home. Social media listening is evolving as a business-intelligence tool.
Promote Insomnia: The "crave-worthy" Insomnia cookies have been a hit with college students. Krispy Kreme is looking to expand its network for "Insomniacs" into metropolitan markets, with more than half of sales through the e-commerce network. That's a digital marketing communications sweet spot.
Drive production efficiencies: New management, production and delivery processes are being rolled out to improve the company's efficiency. Lower costs mean higher earnings. For PR, this is an internal communications opportunity to work with the "Leadership Mix" -- company executives -- to reach and influence "Krispy Kremers" and the Insomniac teams.
How will Krispy Kreme pull this off? Heading into the recent IPO, Krispy Kreme managed PR through two outside agencies. The specialized One Nine Three Group managed financial PR around the IPO, a highly regulated and specialized communications campaign. Meanwhile, Fleishman has been handling media relations aligned to product promotions, generating earned media for the jab campaign.
Under the "keep quiet" provisions of the IPO, we have not yet had a chance to talk with Krispy Kreme marketing communications executives about the role of PR in the Hot Light marketing mix. Stay tuned.
For our class discussion, leaf through the Krispy Kreme prospectus,
which can be found here:
In the comment section below,
post a "fun fact to know and tell"
about the company's business, history,
social media presence or PR efforts.
We'll talk about your personal experiences taking the NC State Krispy Kreme Challenge, but for this exercise, cite details from the prospectus.
Case Study assignment:
Find the latest earnings press release issued by your company.
Identify three to five narratives that company executives focused on.
Deadline: October 6th before class.