Krispy Kreme (DNUT) is aiming to cut time in its doughnut production line through automation.
"Probably within the next 18 months, you'll see some automation starting to go into the frosting, the filling, the sprinkles, and even the packaging," Krispy Kreme CEO Mike Tattersfield told Yahoo Finance Live (video above).
The Winston-Salem, North Carolina-based company announced the investment as part of its Investor Day, along with its long-term outlook of generating $2.15 billion in revenue by fiscal year 2026.
The addition of robots is part of an effort to maximize the fresh hub and spoke model opportunity in the United States, and increase points of access to deliver-fresh-daily (DFD) to grocery stories, convenience stores, quick-serve restaurants, and other locations. With this model, customers can get full-sized doughnuts produced that day, locally, without going to a Krispy Kreme location.
"We've got some pretty big factory stores...we do 12,000 points of access today, which get fresh doughnuts globally," Tattersfield said, emphasizing the major undertaking it is to get so many fresh doughnuts to the various locations. "You need to start looking at what the automation capacity of that is because it is going to the grocers. It is going to the convenience shops."
By 2022 fiscal-year end, Krispy Kreme estimated it will have roughly 5,400 points of access in 30 countries, bringing in approximately $475 million in total revenue. By 2026, it's projecting more than 12,000 points of access in 45 countries, with plans to bring in more than $660 million in revenue.
Meanwhile, automated lines — which would produce 18% of Krispy Kreme doughnuts within the next 18-month period — are expected to result in $2 million of annual savings on a $6 million investment.
Taking the 'repetitive task out of the business' for employees
J.P. Morgan Analyst John Ivankoe, who has an Overweight rating on Krispy Kreme stock and lowered its price target to $13.00 from $15.00 last week, noted that the doughnut company currently spends more than $100 million on doughnut production labor in the U.S., of which "$60 million is related to post-production labor that includes inline icing, inline filling and traying/boxing functions which can be automated."
Despite these automation plans, though, Tattersfield stressed that Krispy Kreme employees — also known as Krispy Kremers and Insomniacs (employees behind its Insomnia cookies business) — are still at the core of the business with the intention to cut out tedious tasks.
"We still are going to continue to drive the experience side with our Krispy Kremers and Insomniacs, so I always find that when companies do a great job, they're balanced in how they try to do that and you try to get the repetitive task out of the business," he said.
And in a competitive environment to recruit and maintain talent, Tattersfield said, the ability to grow as an employee is what sets someone apart.
"It's really about the growth opportunity," he explained. "When you're in a company of our size that even, today, it's still just 400+ producing doughnut shops with a long trajectory of growth ... that growth across country becomes a very attractive proposition. I love to see that our doughnut shop managers are now owners."
Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at email@example.com.