Krispy Kreme Doughnuts Inc (NASDAQ:DNUT) shares soared close to 30% after McDonald’s revealed it plans to sell its doughnuts across stores in the US.
McDonald's Corp (NYSE:MCD, ETR:MDO) will begin to stock Krispy Kreme products in the second half of the year, but it expects it will take two years before the doughnut maker can up its distribution to meet the partnership’s requirements.
Part of the agreement also means McDonald’s will become the exclusive fast-food partner of Krispy Kreme in the States.
Under Krispy Kreme’s current operation, it uses a “hub and spoke” model, with a production facility sending freshly made doughnuts to retailers such as grocery stores or gas stations.
Currently, Krispy Kreme delivers doughnuts to around 6,800 retailers in the US.
A deal with McDonald’s looks to grow this number significantly, with the fast food chain boasting around 13,500 restaurants across the country, with another 900 in the pipeline before 2027.
“We think we can service about 6,000 restaurants with our existing infrastructure, mostly doughnut shops, which have excess capacity,” Krispy Kreme CEO Josh Charlesworth said.
Krispy Kreme is planning on expanding its capacity so that it can reach all areas of the McDonald’s estate, but said it will also use the opportunity to grow its other retail sales channels.
“Overall, therefore, it makes our system more profitable to grow the deliver fresh daily channel, and McDonald’s is an accelerator of that,” he added.