Facebook Twitter

Krispy Kreme, Dunkin’ may duke it out in doughnut war

SHARE Krispy Kreme, Dunkin’ may duke it out in doughnut war

QUINCY, Mass. — Dunkin' Donuts stores are crammed into this Boston suburb like breakfast pastries in a box. There's a full dozen Dunkin' shops in this city where the chain was founded 50 years ago, a stronghold that has long been conceded even by local competitors.

But now a doughnut war may be rising and a coffee battle brewing.

Krispy Kreme Doughnuts, the expanding chain that boasts of piping-hot treats, plans to open 25 full-service shops in New England over the next five years, 16 of them in the Boston area. And Quincy, population 88,000 and growing, is a location of particular interest.

"We're looking for high-density areas with lots of people and high traffic count," said Janice Matthews, vice president of operations at the Jan Companies, a Cranston, R.I., firm hired to scout franchise locations for Krispy Kreme.

Breaking into a community dominated by Dunkin' Donuts is not impossible. Krispy Kreme, based in Winston-Salem, N.C., has done it in other cities, and Honey Dew Donuts, based in nearby Braintree, has grown from a single shop to 150 — all in Dunkin's back yard.

"Krispy Kreme is doing very well in Chicago, which is a very strong Dunkin' Donuts market," said BB&T Capital Markets analyst Andrew Wolf.

The two companies share similar histories, beginning with common origins as single stores run by entrepreneurs.

In 1948, Bill Rosenberg opened the Open Kettle, a lunch counter in Quincy. He changed the name to Dunkin' Donuts in 1950, and five years later he made its first franchise deal. By 1979, the chain had grown to 1,000 shops in the United States and abroad. Last year, the 5,000th shop opened.

Krispy Kreme's roots date back to 1933 in Paducah, Ky., where founder Vernon Rudolph bought a doughnut shop — and with it, a secret doughnut recipe. Rudolph opened his first retail shop in Winston-Salem in 1937 and began opening more across the South. There are now more than 170 stores.

Doughnuts are big business. Dunkin' Donuts, since 1990 owned by British food and spirits conglomerate Allied Domecq, reported sales of $2.3 billion in the fiscal year ending Aug. 31. Krispy Kreme had sales of $448 million in the fiscal year that ended Jan. 28, up 40 percent over the previous year.

What Krispy Kreme lacks in size, it makes up for in dedicated followers. Aficionados swear by the company's glazed doughnuts, particularly when they're available hot.

"They're not just doughnuts," says Stewart Deck, 38, of Arlington, Mass., who has a "Krispy Kreme appreciation page" on the Internet. "When you bite into one, it's like biting into a sugary cloud."

Krispy Kreme touts the impulse buys generated by its "Hot Doughnuts Now" signs, which light up when pastries roll off the assembly line.

Dawn Scartissi, a customer at a Dunkin' Donuts in Quincy, had heard all about Krispy Kreme but had never been to one.

"Oh yeah, it's a big fad, right?" said Scartissi, 29, who was making a mid-morning coffee run for co-workers at a nearby hair salon. "I hear the doughnuts are supposed to be great."

Would she try them? "Oh yeah, definitely," she said.

Publicly, both companies downplay notions of a food fight, saying their businesses have different aims. Dunkin' Donuts says it has succeeded by diversifying its menu to include bagels, breakfast sandwiches and coffee drinks. Meanwhile, Krispy Kreme sees itself primarily as a bakery.

"We're not really looking at Dunkin' Donuts as competition," Matthews said. "Lots of people go to those stores and get a cup of coffee and maybe a doughnut. When they come to (Krispy Kreme), they're getting a dozen doughnuts and maybe a coffee. I think there's room for all of us."

Ken Kimmel, a spokesman for Dunkin' Donuts, agrees.

"What Krispy Kreme has done for the doughnut business is terrific," Kimmel said. "We're closely watching their entry into the market. We think we'll be able to compete across a large number of locations."

It now appears Krispy Kreme is also gearing up for coffee competition.

Earlier this year, the company bought Digital Java Inc., a Chicago-area coffee roasting company that also distributes coffee and espresso machines. Chief executive officer Scott Livengood said Krispy Kreme intends to increase its coffee business and develop espresso-based drinks and frozen beverages.

But Kimmel noted Dunkin' Donuts already sells 650 million cups of coffee a year.

"We feel our expertise in that area is second to none," he said of the coffee trade. "Honestly, what they need to do is not anything that's ever going to change the way we approach it."