Krispy Kreme is sticking to doughnuts. After five years of fostering rapid growth and success for Insomnia Cookies, of which it owns a majority stake, Krispy Kreme is looking to sell off its stake in the cookie chain. Not only has Insomnia made major gains since the 2018 acquisition, but Krispy Kreme’s business has been bolstered by the late-night treats as well. So, why the split?
Insomnia has grown a lot in the past five years, expanding its number of locations from 135 in 2018 to 231 at the end of 2022. Revenue also increased by 24% in the fourth quarter of 2022. At the beginning of this year, it had 30 to 40 new locations already in the works, with intentions to expand into Canada and the U.K. by the end of the year.
Insomnia’s rapid growth also lifted Krispy Kreme’s ecommerce business by 23% in the fourth quarter of 2022, due in part to the expansion of its cookie delivery radius, QSR Magazine reported in February. Krispy Kreme’s recent announcement also notes 45% of Insomnia’s revenue is generated digitally. By all metrics, this is a brand enjoying success.
So, why let go of the business? “Today’s decision enables Krispy Kreme to unlock shareholder value and focus on its core strategy of producing, selling and distributing fresh doughnuts daily,” reads the announcement in part.
The most surprising aspect about Krispy Kreme’s intention to sell the cookie chain is not the company’s renewed dedication to its main commodity, but rather the fact its leadership expressed the same sort of dedication to Insomnia Cookies just a few months ago.
“We truly believe Insomnia Cookies will be the next Krispy Kreme,” said Krispy Kreme’s CEO Mike Tattersfield during the company’s Q4 2022 earnings call. In the most recent announcement, however, Tattersfield notes that “it’s time for the next strategic step for both companies” and that Krispy Kreme’s focus now is to expand into three to five new countries, as well as into new channels like quick service restaurants. This is why more McDonald’s are starting to sell Krispy Kreme doughnuts on site.
No matter how much dough Insomnia Cookies brought in, Krispy Kreme has always and apparently will always be a doughnut chain. Besides, who wants to compete with Crumbl, anyway?