Krispy Creme Is Not Worried About Inflation, And Here's Why
Krispy Creme Is Not Worried About Inflation, And Here's Why
It seems that everyone in the U.S. is worried about rising inflation. According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) showed a whopping 7.5% annual gain in January of this year, representing the fastest rise seen in the past four decades.
As concerning as that may be, Mike Tattersfield, the CEO of Krispy Kreme, is not worried at all. Speaking to Yahoo Finance, he explained that customers are visiting his donut shops infrequently enough that he is able to keep higher prices on their baked goods.
"The average user visits a Krispy Kreme two and a half times a year," he said, explaining that most of its customers view the brand as more of a go-to for celebratory occasions rather than a daily stop-and-shop. This means that the company sees more business during annual events such as Valentine's Day, Halloween, and Christmas, which in turn lends the company some degree of "pricing power."
"We really absolutely maximize the opportunities when it's around Halloween when it's around the holiday season when it's around Valentine's Day ... our number one day in the world. It's about a celebration...it's about a shared experience," Tattersfield added.
Krispy Kreme's prices went up just last September and November, a move that was aimed to offset wage and commodity inflation. Tattersfield says the company plans to introduce even more price increases this year as inflation continues to accelerate.
The company saw revenue gains of 13.8% in the fourth quarter (ending on January 2, 2022), as well as a 23% increase in new revenue for 2021. Yet, despite its slow transition into a somewhat novelty brand, Krispy Kreme still plans to expand its operations into grocery stores to maximize its daily business. The ongoing pandemic has had a negative impact on Krispy Kreme's business, specifically in terms of the company's foot traffic, which saw a 17.54% drop in the week of January 10, 2022 compared to 2020.
R.J. Hottovy, the Head of Analytical Research at data intelligence platform Placer.ai, says that Krispy Kreme's data was "more or less consistent with trends from the broader restaurant industry" during the time when Omicron was dominant. Still, the brand has a long way to go before it can return to its pre-pandemic shape, as shares of the company continue to be down 22% since it went public on the Nasdaq in June of 2021.
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