Krispy Kreme’s collaboration with McDonald’s to sell its doughnuts at every McDonald’s location in the United States didn’t work out as planned.
As part of its results report on Thursday, the doughnut company said it is “reassessing the deployment” of the program, temporarily halting it at 2,400 locations. Since Krispy Kreme has fewer locations than McDonald’s and depends mostly on grocery and convenience stores for its sales, the deal was meant to increase its market share.
Following the opening bell on Thursday, the stock fell 25%.
The exclusive partnership between Krispy Kreme and McDonald’s was launched last year, and by the end of 2026, the confections are expected to be available at all 13,000 of McDonald’s locations in the US.
No new McDonald’s will join the partnership in the second quarter of this year, according to Krispy Kreme, which stated that the pause will allow the chain “achieve a profitable business model for all parties.”
“Krispy Kreme continues to believe in the long-term opportunity of profitable growth through the US nationwide expansion including McDonald’s,” the company said.
In 2022, Krispy Kreme began playing with the relationship in Kentucky before progressively expanding it to other states. Last year, McDonald’s stated that “consumer excitement and demand exceeded expectations,” which led to the expansion of the collaboration.
However, over the last year, the fast food industry’s economics have changed, with both companies facing difficulties. As consumers cut back on their spending, McDonald’s recently reported its worst quarter since the peak of COVID-19.
Meanwhile, Krispy Kreme (DNUT) has had its shares lose 73% of its value over the past year. In order to save roughly $6 million every quarter, the company also declared on Thursday that it will stop distributing dividends to its shareholders.
“Our ability to become a bigger Krispy Kreme requires that we become better, and we are taking swift and decisive action to pay down debt, de-leverage the balance sheet and drive sustainable, profitable growth,” stated Josh Charlesworth, CEO of Krispy Kreme.
