Krispy Kreme Case AnalysisINDUSTRY ANALYSISIn 2003, the donut industry in the United States was a $5 - $6 billion market. American families consume approximately 10-12 billion donuts per year; this translates to over three dozen donuts per capita. In 2002, donut industry sales increased approximately 13%. Sales at donut outlets rose about 9% to about $3.6 billion, while sales of packaged donuts at supermarkets, convenience stores and other retail outlets have faltered over the past five years. A study conducted by Technomic confirmed the growth of donut shops and identified this segment as the fastest growing restaurant category in the country. Further analysis provided by the figure below shows the attractiveness and profitability characteristics of the donut industry. Five Forces Competition Model The players in the donut industry are: Dunkin' Donuts, Krispy Kreme, Tim Hortons, Winchell's Donut House, and LaMar's Donuts. As shown in the pie chart, there is a significant difference in the market share of these competing vendors, with Dunkin' Donuts dominating with 2002 worldwide sales of $2.7 billion, followed by Krispy Kreme and Tim Hortons, each with over $620 million in total. sales. (2002 sales for Winchell's Donut House and LaMar's are not provided.) KRISPY KREME'S EXTENSIVE DIFFERENTIATION STRATEGY Krispy Kreme Donuts (KKD) projects an image as "the Stradivarius of donuts," creating a unique and enriching experience which increasingly wins the enthusiasm and loyalty of customers. Krispy Kreme's warm, sugar-glazed donuts, "doughnut theater" and "HOT DONUTS NOW" feature are clearly some of the differentiators it tries to identify with. Lucky... half the paper... increases his profit margin. This is in line with the company's goal to expand as a multinational company. KKD must keep its business model profitable to continually attract affiliates and maintain quality and consistency as it expands into other regions. Priority pain points that need to be addressed are limited menu offerings and slow response to changing consumer preferences. KKD should use survey methods and conduct independent research to gauge consumer interest in its products and obtain feedback on which items should be included on its menu. In response to health-conscious consumers, you should consider adding items to your menu that have less sugar content and more nutritional value. Attention should also be paid to improving the quality and attractiveness of beverage offerings to align them more closely with the hot donut experience.