Krispy Kreme Forays into India - Analyst Blog

By Zacks | January 21, 2013 AAA

Finally, India has got its first Krispy Kreme Doughnut Inc. (KKD) franchised outlet in the city of Bangalore. The latest opening came in the wake of the signing of a development deal between Krispy Kreme and Citymax Hotels Pvt. Ltd in June 2012.

Per the deal, over the next five years, Citymax Hotels will unveil 80 outlets across the southern and western part of India. Apart from Krispy's signature menus, the Indian outlets will be offering some local variations to cater to the Indian population.   Citymax Hotels Pvt. Ltd., a branch of Dubai-based Landmark Group, boasts superior local market knowledge. The company has a proven track record of venturing into the premium retail industry as well as has the expertise to operate food and beverage companies within the Indian and the Middle East market.

Armed with the strong know-how of Indian food habits, the franchisee is also hopeful of collaborating with a global brand like Krispy Kreme and expects to spread its menu offering successfully among brand conscious consumers.

We believe Bangalore is a strategic fit for entering the country. It is India's 3rd largest city and home to many IT firms, well known universities and research institutes. This city, because of its extreme contribution to the IT sector of the country, is often regarded as the Silicon Valley of India.

However, the Citymax deal followed Krispy Kreme's earlier pact with the franchisee Bedrock Food Company Pvt. Ltd. which was signed a month before, focusing on expansion in Northern Indian.  

These alliances reflect Krispy Kreme's intent to make India one of the prime markets for international expansion considering stepped up economic growth and under-penetration of quick-service restaurants in that country as against the saturated North American countries.

According to a report by the U.S. Commercial Service, the middle income population in India is burgeoning and will grow 10 times by 2025. Indians arguably have a sweet tooth.

The café market in India is growing at a compounded annual rate of 25% over the last five years with Café Coffee Day leading the segment followed by Barista Lavazza and UK-based Costa Coffee, according to an October 2011 report by Technopak Advisors Pvt. Ltd, a Delhi-based retail and consumer goods consultancy firm. This along with the growing income of the larger populace makes India a lucrative investment proposition for Krispy Kreme.

However, the Indian market is not free from competition. Following the growing demand for coffee products, another U.S. coffee behemoth Starbucks Corporation (SBUX) entered the market in Oct 2012. Yet another peer, Dunkin' Brands Group Inc.'s (DNKN) Dunkin Donuts also ventured into the market In May 2012.

There is also Mondelez International Inc.  (MDLZ) which is operating in the Indian market through Cadbury branded chocolates. Apart from these industry equivalents, there are also local confectioneries and brewers currently serving the market.

Krispy Kreme currently retains a Zacks Rank #1 (Strong Buy). Other restaurateurs currently performing well include Bob Evans Farms Inc. (BOBE) which holds a Zacks Rank #1 and AFC Enterprises Inc. (AFCE) which carries a Zacks Rank #2 (Buy).

You May Also Like

Related Analysis
  1. Stock Analysis

    Qihoo 360 Technology Inks Strategic Deal with Coolpad - Analyst Blog

  2. Stock Analysis

    Cousins Properties Inks Deal to Sell 777 Main in Fort Worth - Analyst Blog

  3. Stock Analysis

    Is It Safe to Buy? - Video Blog

  4. Stock Analysis

    JLL Credit Rating Upgraded to Investment Grade by S&P - Analyst Blog

  5. Stock Analysis

    athenahealth (ATHN) Thrives on Customer Wins and Alliances - Analyst Blog

Trading Center