This tiny part of Krispy Kreme’s business is more important than ever before

Krispy Kreme coffee

Krispy Kreme just became part of a coffee empire, as the chain doubles down on its own beverage business.

JAB Holding Company, the parent company of coffee brands including Caribou Coffee, Peet’s Coffee and Tea, and Keurig Green Mountain, is buying Krispy Kreme Doughnuts for about $1.35 billion.

While Krispy Kreme said in January that doughnuts make up 80% of its business, the acquisition comes at a time when the chain is pushing to grow coffee sales.

“Coffee changed over time, and we didn’t change with it,” Krispy Kreme CEO Tony Thompson told Business Insider in December.

In December, coffee made up just 5% of Krispy Kreme’s sales — a figure that Thompson said the chain hoped to double.

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Krispy Kreme’s coffee shop-inspired Clemmons, North Carolina location Krispy Kreme

Last fall, the company opened a coffee shop-inspired location in Clemmons, North Carolina, near the company’s headquarters in Winston-Salem. The new prototype is aimed at boosting beverage sales by revamping the customer experience with vintage signs, natural wood, free Wi-Fi, and a redesigned ordering system and seating area.

“We’re not trying to go be a Starbucks,” Thompson said of the location. “What we want out of this is, people are coming for the doughnut. We want to attach [coffee].”

Krispy Kreme was rolling out aspects of Clemmons store to other locations, in an attempt to boost coffee sales across the business. The company didn’t immediately reply to a request for comment on whether the sale to JAB changes its plans.

The chain is in the process of redesigning locations to better encourage coffee orders, with plans to launch the new ordering system at 70 shops in 2016. New stores and remodeled locations incorporating aspects of the design are expected to open later this year.

Krispy Kreme has said that the drive to boost coffee sales now impacts every aspect of Krispy Kreme’s business, including store design, deals and promotions, and drive-thru strategy. The menu is also evolving, with a relaunch of the chain’s drip coffee this quarter.

“The approach to coffee, it’s not doing one, or two, or three things,” Krispy Kreme’s CFO Price Cooper
said in a call with investors in March. “You’ve got to be comprehensive about that.”

Krispy Kreme is never going to become a fully coffee-centric chain like Caribou Coffee or Peet’s. The No. 1 sales driver will still be doughnuts, with Thompson saying in a statement that Krispy Kreme remains “focused on our long term strategy and continuing to offer our premium, high-quality doughnuts and sweet treats to consumers around the world.”

Still, Krispy Kreme is determined to jump start its coffee business. JAB — a company that wants to create a “global coffee platform” — could be the perfect partner in achieving that goal.

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