In a super sugar smack in the face to Krispy Kreme Doughnuts (NYSE: KKD), Allied Domecq (NYSE: AED) announced today that its Dunkin' Donuts shops will appear in select Wal-Mart (NYSE: WMT) stores. What adds an element of sugar shock is that just last September Krispy Kreme made a similar deal to add its infamous "Hot" lights to several Wal-Marts.
A storefront within Wal-Mart is a sweet, sweet deal. Although, in this stage, the Dunkin' Donuts outlets will only appear in 10 of the discount giant's stores, surely the chain's parent is absolutely salivating at the thought of expansion, which will happen if this test phase works out.
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pick Krispy Kreme, on the other hand, has two outlets in Wal-Mart stores, with five more on the way this quarter. However, it's also worthwhile to mention that Krispy Kreme boxed doughnuts are sold in the front of select Wal-Marts; and boxed doughnut sales were one of the sour notes mentioned in Krispy Kreme's profit warning last week.
Some of the Dunkin' Donuts-within-a-Wal-Mart outlets will make an even bigger bid for the sweet tooth, by pulling in another brand from Allied Domecq's portfolio: Baskin Robbins.
It might only be a matter of passing interest other than the fact that Wal-Mart, with its 3,000 stores, hyper foot traffic, and appealing demographic is a great way to buy some attention, and possibly loyalty, for one's brand and confections. And Dunkin' Donuts is becoming an interesting and increasingly aggressive rival to several popular companies.
Giving prospective customers who wouldn't otherwise stop in Dunkin's stand-alone outlets an easy way to taste its wares -- which, as you probably know, now include lattes and cappuccinos -- it's arguably taking potshots not only at Krispy Kreme but also Starbucks (Nasdaq: SBUX). Adding quick sandwiches to its menu busts it out of the morning routine inherent to doughnuts to challenge even McDonald's (NYSE: MCD), another food retailer that's had stores within Wal-Marts.
For now, the store numbers are small for each of the doughnut companies, but it should be interesting to note which chain ends up passing the Wal-Mart stress test, and at how rapid a pace such expansion could go. "Time to make the doughnuts," indeed.
Does this make you worry more for beleaguered Krispy Kreme? Talk to other Fools about the future of doughnuts on the Krispy Kreme discussion board.
Alyce Lomax does not own shares of any of the companies mentioned, but writing this Take sure made her crave something deep fried and loaded with sugary icing.
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