Wal-Mart Cooks Up Deal To Sell Krispy Kreme

While Krispy Kreme Doughnuts Inc. continues to build new retail outlets in Canada, it's also making inroads on the wholesale front through a pact with Wal-Mart Canada. Wal-Mart announced yesterday that 13 of its southern Ontario stores have begun selling Krispy Kreme's trademark "original glazed" doughnuts. Wal-Mart is the first mass merchandise retailer in Canada to carry the product. In May, Viacom Inc.'s Famous Players theatre chain started selling the treats in kiosks at 10 of its locations. In the U.S., both Wal-Mart and its Sam's Club wholesale club division sell Krispy Kreme doughnuts. The first Canadian Sam's Club stores are to open this fall. In Canada, the deal only applies to Wal-Mart stores "at this point," said company spokesperson Andrew Pelletier. The next phase of the Wal-Mart/Krispy Kreme venture, to be announced next month, will be for additional stores in Ontario. By the end of the year, Krispy Kreme expects to have 11 stores open in Canada — seven in Ontario and four in Quebec. In keeping with its retailing philosophy, Wal-Mart is pricing the doughnuts at a discount, charging $5.97 a dozen, less than the $6.49 a dozen charged at Krispy Kreme stores. Starting yesterday, Wal-Mart outlets in Mississauga, Richmond Hill, Etobicoke, Vaughan, Newmarket, Brampton, Leamington, Chatham, Kitchener, Cambridge and Brantford, plus two stores in Windsor, were to be selling the doughnuts. Roly Morris, president and chief executive of KremeKo, which holds the development rights for Krispy Kreme in most of Canada, said talks with Wal-Mart go back many months. "Wal-Mart was extremely interested, wanted to work with us, and demonstrated that they recognize the value of the brand, and wanted to create a partnership with us," Morris said. Krispy Kreme doesn't feel Wal-Mart's discount is deep enough to harm the brand, which is still evolving in Canada. In addition, while the product is delivered fresh to Wal-Mart stores daily, the doughnuts aren't hot, nor do customers experience the "doughnut-making theatre" that attracts them to Krispy Kreme stores, he said. More retailers will be added to the list of off-premise locations in the coming months, Morris said. KremeKo has received calls from every major retailer in every category in Canada, starting with Famous Players two years ago, before the country's first store even opened, he said. However, the company plans to take a "thoughtful and focused" approach to expanding its wholesale business. Krispy Kreme won't suddenly become available everywhere "because we don't think that that's appropriate for the brand at this juncture in its evolution in the marketplace," Morris said.