Doughnut Wars: Krispy Kreme Takes Another Run at The Canadian Market

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Over the years, we have seen many iconic American brands enter the Canadian market. While some have succeeded in capturing the hearts and wallets of the Canadian consumer, others have quickly learned Canada is a distinctly unique market, which differs in many ways from the U.S.

A classic example is Krispy Kreme Donuts. Those of you who live in, or near, the Greater Toronto Area, will likely recall the excitement the company initially generated when it announced it would be bringing its iconic brand to the Canada. In December 2001, hundreds of customers lined up outside of the brand’s Mississauga location in the middle of the night to buy hot doughnuts at the first Canadian store.

However, the novelty quickly wore off, and by 2005 the company was forced to buy out the first Toronto-based Canadian franchisor after the business filed for bankruptcy protection.

Fast forward 11 years, and the popular American QSR brand, which took the country by storm a decade ago, has made the decision to reinvest in the Canadian market. Now to be fair, it never really left — there are still six locations in Quebec and Ontario — however, the company stated it is ready to expand the business in a significant way, opening as many as 50 additional stores in the two provinces with a less expensive operational model, before setting its sights on the rest of Canada.

This begs the question, why now? The company has undergone a number of significant management changes, which likely led to the decision. Furthermore, the strong greenback provides some added incentive to invest in Canada, while currency rates remain favourable. Lastly, market conditions in Canada seem to support the brands key offering — doughnuts.

Doughnuts are the number-1 baked good consumed at Canadian foodservice, with every fourth baked good ordered being a doughnut (25 per cent). Over the last five years, doughnuts have seen a strong compound annual growth rate of six per cent and, in 2015, this growth jumped to 12 per cent.

Of all the doughnuts served in Canada, 96 per cent are consumed at QSRs. They are predominantly snack items and tend to be eaten at breakfast or as an afternoon pick-me-up. Krispy Kreme locations with drive-thrus align with market sentiment, as 36 per cent of doughnuts served are carried out and 29 per cent are ordered at drive thru.

Not surprisingly, doughnuts are most often paired with hot brewed coffee (around 45 per cent of the time) and hot specialty coffee (10 per cent of the time). Both of these pairings have seen strong growth (more than 15 per cent) on the year.

While the data may support the brand’s offering, winning back consumers is another story all together. Canadians remain fiercely loyal when it comes to QSR brands (especially those that are relied upon for an early morning coffee) and only time will tell if Krispy Kreme can once again shake up the doughnut market.

 

Fisher can be reached at (416) 489-6996, at doug@fhgi.com or at fhgi.com.

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