Context:

Krispy Kreme has decided to pause its partnership with McDonald's, which aimed to sell Krispy Kreme doughnuts at McDonald's locations throughout the US. This decision comes as both companies face economic challenges, with Krispy Kreme's stock losing significant value and McDonald's experiencing a poor financial quarter. The partnership, initially launched in Kentucky in 2022, was designed to expand Krispy Kreme's reach beyond its usual grocery and convenience store sales. Krispy Kreme aims to reassess and achieve a profitable business model before proceeding further with the collaboration. Meanwhile, Krispy Kreme is taking steps to improve its financial health by discontinuing shareholder dividends and focusing on debt reduction and sustainable growth.

Dive Deeper:

• Krispy Kreme has paused its partnership with McDonald’s at 2,400 locations, a move that follows the initial plan to expand the availability of its doughnuts to all of McDonald’s 13,000 US restaurants by the end of 2026.

• The collaboration was intended to leverage McDonald’s extensive reach to increase Krispy Kreme’s sales, as the doughnut chain typically relies on grocery and convenience stores for distribution.

• Both Krispy Kreme and McDonald’s have faced economic difficulties, with the former’s stock dropping 65% over the past year and the latter reporting its worst financial quarter since the peak of the Covid-19 pandemic.

• Krispy Kreme initiated the partnership with a test in Kentucky in 2022 and expanded it based on strong consumer demand, but changing fast food economics have prompted a reassessment.

• In response to financial challenges, Krispy Kreme has announced the suspension of dividends to shareholders, saving approximately $6 million per quarter, and is taking measures to reduce debt and enhance sustainable, profitable growth.