Krispy Kreme Doughnut Inc.
) remains on track to expand its footprint in India with the recent
signing of a development deal with Citymax Hotels Pvt. Ltd. Per the
deal, Citymax Hotels will unveil 80 locations in the country over
the next five years. The outlets will be spread across the South
and West India.
The deal follows Krispy Kreme's earlier pact with the franchisee
Bedrock Food Company Pvt. Ltd for entering the country. However,
the Bedrock agreement, signed a month before, focuses on expansion
in Northern Indian.
The latest alliance reflects 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.
Citymax Hotels Pvt. Ltd., a branch of Dubai-based Landmark
Group, boasts of superior local market knowledge and has a proven
track record of venturing into the premium retail industry as well
as food and beverage giants within the Indian and the Middle East
market. Armed with the strong know-how of Indian food habits, the
franchisee is also hopeful of collaborating with a global brand
like Krispy Kreme and expects to spread its menu offering
successfully among brand conscious consumers.
Earlier, Bedrock Food had commented that coffee and doughnuts
will remain a flourishing category in India over the next couple of
years. It also believes that Indians have a preference for sweet
However, the Indian market is not free from competition.
Following the growing demand for coffee products, another U.S.
) is about to enter the market by the end of August. Also, apart
from local confectioneries and brewers, many other U.S.
restaurateurs are currently serving the market.
According to Krispy management, the company's overseas expansion
is expected to be more in 2013 than in 2012. Encouraged by
international growth over the last six years, the company seeks to
almost double its current overseas store base within 2017.
We believe that Winston-Salem, North Carolina based Krispy
Kreme's extended global reach will augur well for its earnings. 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 stock.
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