Krispy Kreme in Brazil

To:  Krispy Kreme Doughnuts

We want Krispy Kreme in Brazil! Nós queremos Krispy Kreme no Brasil!

This is a marketing plan made by Nicole Kent and it perfectly shows why Krispy Kreme Doughnuts should come to Brazil.
It belongs to Nicole Kent and no copyright infringement is intended.

Nicole Kent
11429054
Due: 07/01/08
International Marketing 2MKT659
Individual Assessment and
Reflective Statement
IA Word Count: 2,405
RS Word Count: 494

Marketing Plan for Krispy Kreme Doughnuts

Introduction
Krispy Kreme Doughnuts has been a successful company for many years. The company was able to start expanding internationally in 2001. It opened its first store in the United Kingdom in 2003 at Harrod’s Department Store in Knightsbridge. Krispy Kreme has been a success in the United Kingdom and should continue expanding into other countries as well as other parts of the world. The best candidate for a new overseas market at this time would be Brazil. This report will thoroughly examine the reasons why it would be a good business decision for Krispy Kreme to enter into the Brazilian market.

Why Brazil?
There were many qualified markets that would have been great for Krispy Kreme to enter, but the best option would be Brazil. Brazil is the fifth-most populated country and Latin America’s largest market. The country has the world's tenth-largest economy in terms of Gross Domestic Product. Much of the reason for this is because of the governmental development and liberalization of the economy over the last two decades. Military rule ended in 1985 which had been going on for over half a century. In 1988 a new constitution for Brazil was approved for the country. Since then, the country has seen much improvement and continues to mold and restructure Brazil’s economy to make it the best as possible. The variety of cultures throughout Brazil has been a positive attribute in helping the economy throughout the years.
A unique aspect that made Brazil the best candidate for a new market was because of the diversity throughout the country. Most of the population descends from early European settlers who were chiefly Portuguese. There were also some Italian, French, Dutch, African slaves, and assimilated indigenous peoples. Starting in the late 19th century many people from several different countries immigrated to Brazil. Some of these countries are: Italy, Germany, Spain, Poland, Lebanon, Syria, Ukraine, Russia, Lithuania, Hungary, Armenia, Japan, China and Korea.
Another unique characteristic Brazil has is that it is the only Portuguese-speaking nation in the Americas, giving it a distinct national culture separate from its Spanish-speaking neighbors Portuguese is the only language with full official status in Brazil; it is virtually the only language used in schools, newspapers, radio and TV, and for all business and administrative purposes. Even though Portuguese is the main language among the Brazilian culture there are other languages such as English, French, German, Italian, etc. which are spoken by some people.

Alternative Markets
New Zealand
One of the other possible candidates that were considered was New Zealand. The reason for this would be because the country is starting to become more internationalized and Krispy Kreme has been well established already in Australia. Although Australia and New Zealand are different countries they would be classified in similar markets. The one reason why New Zealand wasn’t the best candidate was because of the population of the country. The population of New Zealand is only a little over four million people, so even if Krispy Kreme was going to be a success in New Zealand it probably wouldn’t create as much business and profits as Brazil has the potential to do. Brazil has a population of over 190 million people.

Western Europe
Western Europe was another candidate for a market that Krispy Kreme could enter into. Krispy Kreme has already expanded into the United Kingdom, but they haven’t opened any stores in other European countries which could have a lot of potential. The reason why Europe wasn’t the best candidate for the new market choice was because of limitations dealing with the cultures in different countries. For example, in France and Italy they have many pastry shops and local bakeries which people are already loyal to and it might be too difficult to bring in a commercial company that would end up being successful.

Market Entry Strategy
The best strategy to enter into the Brazilian market would be to do franchising. Franchising is a marketing-oriented method of selling a business service, often to small independent investors who have working capital but little or no prior business experience. Krispy Kreme has franchised Korea, Japan, China, the Philippines, Indonesia, Kuwait, Dubai, Mexico, Australia, Canada, the United Kingdom, and the United States where the company originated. They have seemed to be successful with opening franchises in all of these countries and plan to keep expanding in the future. Krispy Kreme has the same franchising requirements for anyone who wants to buy into the Krispy Kreme franchise. Krispy Kreme has three franchising requirements. These requirements are:

1. Applicants must have current ownership and operating experience or previous ownership and operating experience of multi-unit food service operations in the market that you desire to develop.
2. Our franchisees must possess the capital sufficient to fund the development of the market. We currently grant franchises on an area development basis. Specifically, our area developers are required to build multiple stores (10 or more) in a market. The minimum net worth requirement is $30 million or $1,000,000 per store to be developed, whichever is greater. For instance, a 15-store market requires a minimum net worth of $30,000,000.
3. Area developers must have substantial familiarity with the market proposed for development and be willing to develop multiple units over a period of time. In addition, they must be willing to diligently exert full-time best efforts in performing their obligations under the area development agreement.

Along with these requirements the company will also have to follow the franchising laws of the country. This could be problematic because there might be difficult barriers involved with the franchising process that could be time-consuming. After reading over the franchise disclosure laws for Brazil it seems that Krispy Kreme shouldn’t have too many major issues with opening a franchise in Brazil. However, if it becomes too difficult to open a franchise, it might be a good business decision to do a joint venture with a well established business in Brazil such as a department store, supermarket, etc.
Even if the company doesn’t have any problems with franchising in Brazil, they should definitely consider doing a joint venture with another established company. When Krispy Kreme started in the United Kingdom, they did a joint venture with Harrod’s for their first store. It was a great success and helped Krispy Kreme establish their brand in the United Kingdom. Doing a joint venture could be a great way for Krispy Kreme to establish their brand image a lot quicker than they might just opening a new business themselves. Opening up a franchise or doing a joint venture could both be successful for the company.

Marketing Mix
Product
Krispy Kreme has a key universal product which is doughnuts. All of the Krispy Kreme stores have the original-glazed doughnut which is the same in every store because they use the same original recipe that was created in 1937 to make each doughnut. Each store can produce anywhere from 2,400 to over 6,000 dozen per day, which are sold both on premises and off-premises. With other variety doughnuts, new ones could be considered that would fit the demands of customers in Brazil. The country as a whole has a sweet tooth so many of the variety doughnuts as well as the original glazed will be perfect to fulfill those cravings.

Price
The biggest issue with price is that the exchange rate has to be taken in account to accommodate the potential market and make profits for the company. The customers have to be charged enough for the product so that the company will be able to make a profit, but they also have to figure out how much the people will be willing to spend on a doughnut and what they can afford to spend. It also might be worth considering whether or not customers would be willing to buy doughnuts by dozen, individually, or somewhere in between. Accommodations could be made it in order to meet the demands of customers in Brazil.

Place
Although there are many major well populated cities in Brazil, the South-East region of the country would be the best location for a Krispy Kreme store to be opened. One of the reasons is because the South-East region has the largest population, totaling 69,174,339 people. It is also the region with the highest demographic density and urbanization. Some of the major cities in the South-East region are: São Paulo, Rio de Janeiro, Belo Horizonte, Santos, Vitoria, and Tubarao. Its economy is the most developed and industrialized of the economies of the five regions, accounting for more than half of Brazil's production. To start out with, it would be best just to open up shops and see how successful they become. If they are successful, then it could be smart to sell doughnuts in supermarkets and convenience stores like Krispy Kreme does in the United Kingdom with Tesco.

Promotion
Portuguese is the official language spoken in Brazil so promoting things in Portuguese would be the most sensible idea. You could also consider promoting in different languages in areas where there is a specific language spoken by the majority of people. Many businesses promote their products or services through public advertisements such as billboards and advertisements in public transportation areas in major cities. This would be the best way for Krispy Kreme to promote their new product in Brazil. Also, in the South-East region most people are internet friendly so internet advertisements would be sensible to reach their market. Many people in Brazil haven’t heard of or had Krispy Kreme before so for new store openings it could be a strategy to have taste-testing available to promote their product to new customers.

Barriers to Enter Into the Brazilian Market
When entering into any market there can be many barriers that would limit entry into the new market. There are some limitations that could be problematic for entering the Brazilian market but they shouldn’t be a huge issue to worry about. However, they still need to be taken into consideration and examined in order to find ways the resolve the limitations so they no longer continue to be an issue.
One problem that needs to be recognized is the taxation system in Brazil. Brazil has a poorly structured revenue system characterized by heavy tax burdens, a narrow taxable base, complicated levies and widespread tax evasion. Companies, both foreign and domestic, employ tax professionals and devote considerable resources to managing their tax affairs. The corporate and indirect taxation systems are particularly complex, porous and unwieldy; the income tax system is considered to be relatively efficient, with a top rate of 27.5%.
Another problem that might be of concern is Brazil’s franchise laws. Brazil, like any other country, has there own franchise laws that need to be taken into account because Krispy Kreme is a franchise business. As talked about previously, Krispy Kreme has their own franchise standards that they have in order to find franchisees that will be successful with the company and carry on a positive brand image. These regulations need to be taken into account along with the franchise laws that the Brazilian government has created.
The location of where your stores are at could make or break your business. As stated before the best location for a Krispy Kreme would be in a major city in the South-East region. The only problem is that it may be hard to expand and open many other stores in other cities because many aren’t as well developed as the South-East region.

How Krispy Kreme can adapt to Brazil’s culture
One of the biggest barriers that almost any business has to face is the cultural differences among different countries and being able to adapt to these cultures to make a successful business. However, the Brazilian culture doesn’t seem like it will be difficult for Krispy Kreme to adapt to.
If you compare the psychic distance between the United Kingdom and Brazil they almost couldn’t be anymore different. The United Kingdom mainly speaks English while Brazil mainly speaks Portuguese. English people generally prefer more savory tasting foods when it comes to their breakfast, but Brazilians have more of a sweet tooth, consuming many fruits, sugar, and spices to make sweet treats. The psychic distance between the two countries is so different but it seems to work out in the advantage of Krispy Kreme.
If the Brazilians prefer more sweet treats then Krispy Kreme is going to be the perfect place for them to fulfill their cravings for sweets. The best way for Krispy Kreme to adapt to the Brazilian culture is to keep their original glazed doughnut, but also incorporate many of the popular fruits in the areas into the variety doughnuts. If you think about it, when the Brazilians are making themselves treats they will use the fruits that they like and are available to them. If Krispy Kreme takes that into account and can adapt to the culture, then people wouldn’t have to take the time to make their sweet treats because there would be something offered to them already.
The uniqueness of Krispy Kreme as a whole will make it easy for the Brazilian culture to adapt to. Having the Hot Doughnuts Now sign will help with getting customers to come into the store and try this new product. Once they are in the store, the doughnut theater will be a unique selling point that will keep customers coming back because they are able to see the doughnut-making process every time they visit the store. Also the doughnut’s one-of-a-kind taste will get customers to keep coming back for more.

Conclusion
Krispy Kreme is a strong powerful brand which has been successful for many years. They have succeeded in expanding internationally and will continue to succeed as they go into new markets like Brazil. Brazil is an ideal candidate for Krispy Kreme to consider as a new market for their company. They are becoming more of an international country in terms of their economy and would be perfect for the Krispy Kreme franchise. Although there may be some issues that will faced with when going into this new overseas market, they don’t seem to be of enough concern to not concern Brazil as a new market candidate. As long as the culture and laws of Brazil are recognized and adapted to accordingly, there shouldn’t be any issues or problems with entering into this country.

The text above can also be seen here: http://www.plu.edu/~kentnj/doc/krispy-kreme.doc

I hope you consider this petition, you won't regret later.
Thank you!

Sincerely,

The Undersigned

The Krispy Kreme in Brazil Petition to Krispy Kreme Doughnuts was created by and written by Bruno Piccinin (bruno_piccinin@hotmail.com).  This petition is hosted here at www.PetitionOnline.com as a public service. There is no endorsement of this petition, express or implied, by Artifice, Inc. or our sponsors. For technical support please use our simple Petition Help form.