One of the
sweetest IPOs of the year
 For
a consumer, there are few things sweeter than a Krispy Kreme
doughnut. For an investor, there have been few things sweeter in the
past year than Krispy Kreme stock. The decision to take the
Winston-Salem company public in 2000 was met with a tremendous
response from investors, who made it the country’s second-most
successful public offering of the year. After less than 11 months of
trading on NASDAQ and explosion of development in opening new market
areas across the country, KKD became the newest symbol on the New York
Stock Exchange in March of this year.
Stock market officials were so impressed with Krispy Kreme’s
performance they asked president and CEO Scott Livengood (above
left) to ring the market’s opening bell. Krispy Kreme responded
by inviting everyone outside to a temporary Wall Street store to
sample for themselves the product that has caused such incredible
demand.
Since Krispy Kreme became a public entity its stock has split twice
and continues to gain ground. Corporate revenues during the last
fiscal year topped $300 million, up more than 36 percent from the
previous year. Retail outlets now produce 3 million doughnuts every
day, or 1.3 billion each year. To put it in perspective, that’s more
than twice the number of doughnuts that would be required to encircle
the earth.
“It’s been the experience of a lifetime to have been a part of
this company and building a team to take Krispy Kreme to new
heights,” Livengood says. “We are extremely grateful to our
customers for their support. They are the ones who have made our brand
what it is today.”
Livengood smiles as he recounts the story of Krispy Kreme’s debut in
Oklahoma City, Okla. He was greeted at the ribbon cutting ceremony by
the usual throng of customers waiting at the front door and
drive-through window. Then it was on to City Hall where the mayor
issued a proclamation declaring Krispy Kreme Day. After returning to
the store and talking with some of the still-steady stream of
customers, he returned to Winston-Salem. The next day he learned that
the lines had remained incredibly long throughout the day, posing a
dilemma as the store’s midnight closing time rolled around.
When the “Hot Doughnuts Now” lights first came on as a new store
opened in Denver, the first customer to bite into the delicacy had
been in line since 9 a.m. — the day before.
The overwhelming response to Krispy Kreme is nothing short of
phenomenal and at the same time humbling to Livengood, who grew up in
Winston-Salem and rose through the ranks to become company president
in 1992. He added the title of CEO six years later and was named
chairman of Krispy Kreme’s board of directors a year later, in 1999.
The first Krispy Kreme doughnuts were made in Winston-Salem on July
13, 1937, by founder Vernon Rudolph. Four years earlier he had bought
a doughnut shop in Paducah, Ky., and with the purchase came the rights
to a secret yeast-raised doughnut recipe. Rudolph later moved to
Nashville and opened a doughnut shop, then to Winston-Salem in 1937.
He brought with him two partners, $200 in cash, his doughnut-making
equipment, secret recipe and the name Krispy Kreme.
Using his last $25 to rent a manufacturing plant across from Salem
College and Academy in modern day Old Salem, Rudolph convinced a local
grocer to extend him credit for the ingredients he needed with a
promise to pay once the first doughnuts sold.
Rudolph altered his 1936 Pontiac to serve as a delivery vehicle by
removing the back seat and he began merchandising Krispy Kreme
doughnuts, priced at two for a nickel or 25 cents a dozen. He didn’t
foresee using the plant as a retail outlet, but soon doughnut-hungry
customers started lining up at his doors. To accommodate them, he cut
a hole in the shop’s wall to sell his product.
No doubt a key to Krispy Kreme’s success has been its quality
control over the manufacturing process. Krispy Kreme maintains its own
recipes for the signature original glazed doughnut along with a dozen
other yeast-raised and cake doughnuts, fruit pies, cinnamon buns and
other snack foods. Computerized equipment in Winston-Salem is used to
blend ingredients into a dry mix, which is then shipped to Krispy
Kreme stores across North America for fresh production in each
location.
Leaving nothing to chance, Krispy Kreme even manufactures its own
doughnut-making equipment, assuring a perfect doughnut every time. To
complete the package, in February, Krispy Kreme acquired Digital Java
Inc., a Chicago manufacturer and distributor of coffee and other hot
and cold beverage equipment. Similar careful planning has directed the
company’s expansion efforts. Concentrated areas of the country with
populations of 100,000 or more were targeted for the location of
Krispy Kreme franchise and company stores, as well as distribution of
products in area supermarkets, convenience stores and other retail
outlets.
To accommodate its rapid growth, Krispy Kreme announced in February it
would expand its manufacturing and distribution equipment division and
training facility to Winston-Salem’s Centre 311 Business Park,
adding to its existing presence in the city of a mix manufacturing
facility and corporate headquarters. The operations will soon be
joined by a state-of-the-art, 187,000 square-foot manufacturing and
distribution plant in Effingham, Ill., to serve the company’s
markets in the West and Midwest.
To date the company has opened more than 180 stores in 29 states,
bringing the Krispy Kreme taste to doughnut lovers from Sacramento to
Sioux Falls. Even Canadians will be discovering Krispy Kreme, thanks
to an agreement late last year to open 32 stores across Canada in the
coming years. The company has even sent signals that it intends to
take Krispy Kreme beyond the boundaries of North America, announcing
in June that it is exploring opportunities in Europe and Asia. In
fact, Krispy Kreme has fielded inquiries from 53 countries around the
globe, including such faraway markets as Guam, Poland and Korea.
Even with universal appeal and amazing growth, Krispy Kreme remains
committed to its roots in Winston-Salem. “We couldn’t be happier
to call Winston-Salem the home of Krispy Kreme, and we’re fully
committed to this community,” Livengood says. — Jerry
Blackwelder
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