Krispy Kreme Inc. said Wednesday it will not proceed with plans for a $5.8 million expansion of its Winston-Salem operations, which would have added up to 180 jobs.
The manufacturer said on Dec. 5 that it would produce its Branded Sweet Treats line at its Ivy Avenue production facility.
Branded Sweet Treats are pre-package doughnut products available in snack aisles in a small number of grocery stores, the company said. The product line debuted in 2020.
“While we no longer plan to expand our Winston-Salem manufacturing facility and workforce, we will maintain our existing Winston-Salem operations and our nearly 300 employees,” Krispy Kreme spokeswoman Eloise Hale said.
Krispy Kreme said it had hired “a small” number of employees for the local expansion.
“We are supporting our affected employees, all of whom are eligible to apply for any open position or for severance and outplacement services,” Hale said.
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The expansion decision had been celebrated by local civic and elected officials, as well as Krispy Kreme, as reinforcing the importance of Krispy Kreme’s original hometown before moving its corporate headquarters to south Charlotte in 2018 as part of an initiative designed to raise its U.S. and global profiles.
“I’m disappointed about losing any jobs, but losing an expansion of jobs in east Winston is unfortunate,” said Don Martin, chairman of the Forsyth County Board of Commissioners. “Ease of getting back and forth to work improves everyone’s quality of life.”
Martin said he “understands that Krispy Kreme operates in a demand-driven marketplace that changes from time to time. I would feel a lot worse if we had lost that expansion to a plant located outside of Forsyth County. At least we will keep our jobs here, unlike the plant in Concord that was closed.”
Mark Owens, president and chief executive of Greater Winston-Salem Inc., said that “we understand that businesses sometimes need to alter their plans and that is out of control of the local community.”
Concord plant closing
The confirmation comes five days after Krispy Kreme filed a WARN Act notice March 10 with the N.C. Commerce Department that it was closing its Concord plant, affecting 102 jobs, where it produces pre-packaged products.
The jobs of employees at the Concord plant at 315 Wilshire Ave. SW are expected to end by May 11. Employees have been notified of their separation date, according to the WARN notice.
Krispy Kreme said the Concord plant closing and decision not to expand in Winston-Salem comes from a decision to put its focus mostly on in-store sales.
“Our fresh daily doughnut business is strong, profitable and growing quickly,” Hale said. “This is the area where we are focusing our investments and resources.
“Because of this, we chose to exit our underperforming, extended shelf-life snack aisle business.” That included closing the Concord plant.
Hale said convenience stores “sell our fresh doughnuts, not the pre-packaged.”
“We are now focusing our investments and resources on doughnuts that consumers buy in our shops, order through our app and website for in-shop pickup, or delivery and buy in a delivered fresh daily doughnut case at our partner grocers and other retailers.”
Mike Tattersfield, Krispy Kreme’s president and chief executive, said Wednesday at a Bank of America Securities investor conference that it expects consumers will recognize that the dozen doughnuts being sold in a grocery store is very similar to what's sold in a shop.
"We're making it easier for consumers to have access to our products because it's now in the grocery store," Tattersfield said.
"The assortment in the grocery store looks exactly like our shop," citing as an example the green St. Patrick's Day doughnut being available in both venues.
"When the consumer starts to see that trend, then they start thinking about the convenience aspect for them, so the trip to the shop is a special treat for them and their family, to get a hot doughnut off the line."
Hale said the exiting of the Branded Sweet Treats does not affect Krispy Kreme’s fiscal 2023 and 2026 growth and financial targets, as well as our guidance.
“Our fresh daily global doughnut business continues building on its long-term trajectory to 75,000 points of access,” Hale said.
Bowman Gray IV, a local independent stock broker, said the decision to end Branded Sweet Treats so soon after introduction “is a reasonable move.”
“Anyone who has ever bought a glazed doughnut from the grocery store Krispy Kreme shelf knows that it doesn’t come close to what a fresh ‘Hot Now’ one tastes like.
“This will provide them with the resources needed for the Insomnia Cookie push as they try to expand.
On Feb. 23, Insomnia Cookies, a subsidiary of Krispy Kreme, said it plans to enter the Canadian and United Kingdom markets this summer with Toronto in Canada and Manchester in the U.K. as the initial entry points.
Tattersfield said during an analyst conference call Feb. 16 that there are plans to go from 231 Insomnia Cookies shops now until it exceeds 4,000 global locations.
Tattersfield said Wednesday during a presentation at the Bank of America Securities investor conference that Krispy Kreme plans to limit the length of some of its promotional campaigns after reviewing its Beat the Pump and COVID-19 booster shot efforts.
In October, Krispy Kreme closed its plant in Burlington, Iowa. The plant closing would affect 80 employees.
The company said at that time the production would shift to Krispy Kreme operations in Winston-Salem and Concord.
Krispy Kreme said in a statement in October that the production shift is part of “an effort to drive efficiency within our manufacturing network and position the company for growth.”
Tony Plath, a retired finance professor at UNC Charlotte, said the pre-packaged products were “always a bit of an afterthought for the company.”
“Hot, fresh doughnuts are the signature staple of both their product line and their brand, which you just can’t duplicate in any retail store environment. The business has always been a destination focus, rather than a retail shopping afterthought.
“So, I suspect that there’s very little lost brand identity in vacating the retail store channel, and what little they might lose in brand identity and sales by exiting this channel will easily be replaced by the new business they’re going to pick up from their expanding McDonald’s sales channel.”
Krispy Kreme had committed to paying an average annual wage of $33,150 for the new job positions that would have included machine operators, line packers, quality technicians, product mixers, forklift drivers and others.
The Winston-Salem City Council approved up to $158,456 in performance-based incentives toward the planned expansion, while the Forsyth County Board of Commissioners previously approved nearly $110,000.
None of the incentives have been paid out.
The incentives require that the company retain 37 existing jobs at the Ivy Avenue site.
The company qualified for a $60,000 state Rural Division Building Reuse grant from the N.C. Commerce Department.