The increase in points of access, combined with e-commerce growth, will fuel sales per hub and profitability, according to the CEO. U.S. and Canada earned $4 million per hub in 2021, an increase of 14.3 percent, while international outlets hauled in $9.1 million per hub, or growth of 42.2 percent year-over-year.
To widen its delivery coverage and further leverage its e-commerce platform, Krispy Kreme is investing in "dark shops." Unlike a ghost kitchen, nothing is produced inside the outlet; fresh doughnuts are sent to the location, and then picked up by third-party delivery drivers. After opening more than 50 dark shops in the U.K., the company is looking to ramp up growth in the U.S. and Mexico.
“It's a low-cost investment, but it gives you a fresh doughnut drop that can then get to that customer in there and it gives you a delivery radius where people will want to use the e-commerce channel,” Tattersfield said. "… You've got to deliver fresh, right? That's what the customer has their expectation. And this is what this hub-and-spoke system can do, even including the dark shop in that portfolio.”
Meanwhile, doughnut LTOs—such as the chain’s Halloween and winter holiday assortments—are driving engagement and premiumization. The innovation gives Krispy Kreme strong pricing power, sometimes up to 50 percent more per item than the original glazed doughnut.
In 2021, 30 percent of purchases were to celebrate special occasion and events.
“In general, our teams rally around seasonal events, which is when branded sweet treats really matter, such as Valentine's Day, which happens to be one of the top events for Krispy Kreme across the globe,” Tattersfield said. “Chinese New Year would be another example of a growing, gifting celebratory event. The product, the packaging, the emotional storyline connection, really matter for our customer.”
Efficiency of the hub-and-spoke model and price increases in September and November more than offset labor and commodity inflation, CFO Josh Charlesworth said. For the full year, adjusted EBITDA increased 29.2 percent to $187.9 million, with margins increasing 60 basis points to 13.6 percent. The chain expects 15 percent company-wide margins in 2023.
Krispy Kreme ended the year with double-digit price increases in the U.S., and high single-digit hikes across the world on average. The chain saw wage inflation accelerate throughout 2021, but it has since stabilized; the brand is projecting high single digits for 2022.
As for commodities, the chain has a good line of sight because sugar is locked in for the year and oil and gasoline are covered through 2023.
“That means we have a lot of confidence in our ability to deliver on the margin increase that we've been talking about already,” Charlesworth said.
Krispy Kreme’s digital-first cookie company, Insomnia Cookies, is experiencing notable growth, as well. The chain ended 2021 with 210 stores, or net growth of 26 locations.
Revenue grew by more than 30 percent, and by nearly 20 percent if excluding new store revenue. Insomnia is looking to reach more than 600 locations in the U.S., with plans to also expand internationally. In the fourth quarter, the brand reached—for the first time—adjusted EBITDA margins on par with the U.S. doughnut business.