Krispy Kreme begins assault on Canada

Few retailers in North America truly understand the importance of 'The Brand,' says Roly Morris. But those that do - Starbucks Corp., Gap, Roots Canada - are among the most successful organizations in North America....

Few retailers in North America truly understand the importance of ‘The Brand,’ says Roly Morris. But those that do – Starbucks Corp., Gap, Roots Canada – are among the most successful organizations in North America.

Morris, who this month was appointed chief executive officer of Krispy Kreme Doughnuts Eastern Canada, says Winston-Salem, N.C.-based parent company Krispy Kreme Doughnuts is among that elite group, and he intends to leverage its sweet and doughy equity for all it’s worth.

It’s not the first time Morris, who will oversee the opening of 32 stores across Ontario, Quebec and the Maritimes over the next six years, has hooked his reputation to a branding star.

Before he took on the role of bringing the Krispy Kreme brand to the Eastern Canadian market, Morris spearheaded Starbucks’ flash-fire expansion across Canada in the 1990s. By the time he left the company in 1997, the upscale coffee chain had 155 stores across Canada, up from 15 – all in the Vancouver area – when he started just six years earlier.

Morris says he came to understand the pre-eminence of the brand during his years in the grocery and quick-service food industry. While he worked his way up in management positions at Miracle Food Mart, The Kitchen Table and McGavin Foods, Morris watched competitor Loblaw Cos. become the dominant brand in the grocery segment.

Among the valuable lessons he learned during that period, says Morris, were to ‘respect the brand’ and to never place the product in distribution channels that don’t enhance its image.

‘There are lots of people who don’t look at things that way,’ says Morris. ‘They just look at a distribution channel as a distribution channel.

‘We are not going to come at it from that perspective. We’re going to come at it from the perspective that we understand the brand, period, and we will protect the brand image and enhance and grow that brand image,’ he says.

No small task, especially when you consider the iconic status of the Krispy Kreme doughnut.

In the U.S., where the chain has 165 stores in 28 states, the exceptionally sweet and gooey confection has achieved the kind of cult status usually reserved for reclusive authors, dead rock stars, and rising directors.

The 63-year-old brand has made cameos on TV shows and movies, and has even been declared a national treasure by the Smithsonian Institution.

Of course, Morris has seen this kind of thing before. When he took over Starbucks, the coffee chain’s vaunted reputation preceded its expansion east. In the early ’90s, the chain’s Vancouver outlets were a must-stop for Toronto and Montreal trendsetters and business people.

While Starbucks’ expansion was on a considerably grander scale than is planned for Krispy Kreme, Morris says he sees some very close parallels between the two companies.

‘There really are a lot of similarities in terms of focus, and obsession with quality, and concentration on one business. Starbucks was the coffee experience; this is the doughnut experience,’ says the Toronto native.

Geoff Wilson, an independent food service analyst, says the choice of Morris to lead Krispy Kreme’s foray into Canada was an excellent one. ‘It’s a special product and you’ve got to understand the nuances.

‘So somebody who’s dealt with a special product all along is going to understand the implications of what a specialized product needs to be successful in the market. I think [he is] a superb choice.’

Still, it’s unlikely that Krispy Kreme will become as dominant a presence on the Canadian urban landscape as Starbucks.

That’s because the stores – which feature what Morris calls ‘doughnut-making theatres’ that allow customers to watch the product being made – require 4,000 square feet of space and up to 1.5 acres of land. Not the kind of real estate typically available on Toronto’s Yonge Street or Montreal’s rue St-Catherine.

As a result, the company will be scouting suburban locations for all its outlets.

The massive stores, which have a 1950s, retro feel, feature neon signs that flash ‘Hot Doughnuts Now’ when a fresh batch is ready.

The signs are a central feature of the brand, says Morris, and make delivering doughnuts to smaller retail outlets in the downtown core a difficult proposition. The only market where smaller stores have been set up is in Manhattan, where doughnuts are prepared on-site in scaled-down operations. Morris, however, believes these stores fail to deliver the seminal Krispy Kreme ‘multi-sensory’ experience.

‘The in-store experience, the hot doughnut, is so fundamental to our establishing a relationship with the customer that you’ve got to do those [larger] stores,’ Morris says.

So, is the expectation that downtown Torontonians and Montrealers will travel all the way to the outskirts of their respective cities to get a doughnut?

Yes, says Morris.

‘Typically, Krispy Kreme’s experience has been that people will drive 14 miles,’ he says. ‘Will Canadians do that? We don’t know. We believe that this product has that kind of a draw.’

He certainly hopes so. Because the company does no mass media advertising.

Morris says marketing for the eastern Canadian operation will likely mirror the approach taken by Krispy Kreme’s other franchises. This includes setting up partnerships with a few key charity and community organizations and developing relationships on a grassroots level.

A big part of Krispy Kreme’s relationship marketing efforts, Morris says, revolve around these charities’ fundraising activities. Krispy Kreme sells its product to the charities at a discount, and the groups sell the product door-to-door. Organizations can also buy discounted gift certificates or ‘partnership cards’ which allow the bearer to receive a free dozen doughnuts for every dozen purchased.

Still, Morris has not ruled out breaking with tradition and pursuing some mass media avenues for the eastern Canadian operation.

As for when Canadians will get to experience their first Krispy Kreme doughnut, Morris is planning three store openings for 2002, although he’s not certain where they’ll be located.

‘It’s obvious to say that we want to be in the prominent marketplaces first. However, because real-estate [sellers are] so opportunistic, sometimes you have to take it where it comes.’