Krispy Kreme Doughnut Inc.
) is close to entering India with the signing of a development deal
with franchisee Bedrock Food Company Pvt. Ltd. As per the deal,
Bedrock Food Company will unveil 35 locations in the country over
the next five years. The outlets will be in six states in Northern
India and will be located in cities like Delhi, Jaipur and
Bedrock Food Company Pvt Ltd, a leading corporation specializing
in restaurant operations, boasts of considerable local market
knowledge. The company also has the development right for Subway
and is spreading the brand in parts of North, West and South India.
Bedrock operates approximately 185 Subway restaurants, indicating
the managerial efficiency of the company in that region.
The latest alliance replicates Krispy Kreme management's intent
to make India one of the prime markets for international expansion,
considering stepped up economic growth and under-penetration of
quick-service restaurants in that country as against the saturated
North American countries. Additionally, Bedrock Food Company sees
coffee and doughnuts as flourishing category in India over the next
couple of years. It also believes that Indians have a preference
for sweet food.
However, the Indian market is not free from competition.
Following the rising demand for coffee products, another U.S.
) is about to storm the market. Starbucks is slated to launch in
India by the end of August. Also, apart from local confectioneries
and brewers, many other U.S. restaurateurs are currently serving
Presently, Krispy Kreme's coffee and doughnuts are available in
over 690 stores in 21 countries around the globe. According to
management, the company's overseas expansion is expected to be more
in 2013 than in 2012. Encouraged by immense growth in international
exposure in the last six years, the company seeks to almost double
its current overseas store base within 2017.
At the end of fourth quarter 2011, the company had 460
international stores. It is also under agreements to open 270
locations in nine different countries. Comparatively, Krispy Kreme
has fewer domestic properties. In order to fulfill the target of
opening 900 international outlets by 2017, the company remains in
the constant process of identifying further possibilities outside
the U.S. It is concentrating specifically on Europe, Russia, India,
China, Central and South America apart from spreading in existing
We believe the company's extended global reach bodes well for
its financials. On the flip side, there is some fear of
deterioration in international comparable store sales from
cannibalization by the new stores. Krispy Kreme currently retains a
Zacks #4 Rank, which translates into a short-term Sell rating. We
are also maintaining our long-term Neutral recommendation on the
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