Krispy Kreme thinks you'll pay more for 'premium' doughnuts. The chain is about to test that theory.

Mike Tattersfield, the company’s president and chief executive, told analysts during Wednesday’s second-quarter earnings call that “we expect to launch a fourth price tier later this year for our most premium donuts.”

The current Krispy Kreme menu has a single original glazed doughnut priced at 99 cents, with mid-priced doughnuts at $1.09 and specialty doughnuts at $1.29.

The yet-to-be-disclosed premium treats would follow the introductions of higher-priced hand-cut cinnamon rolls available on Sundays, and a recently launched fritter available only on Fridays through the end of 2022.

Tattersfield said the debut of the hand-made cinnamon roll demonstrated that consumers would pay for a premium Krispy Kreme treat.

He stressed that the chain wants to remain affordable.

“But, there’s clearly an opportunity to continue to put premium into our brand while we still try to maintain that kind of base price per dozen …”

Tattersfield said Krispy Kreme is aware that “it’s really about always finding the price where customers think it’s worth it.”

“You can either be reactive or proactive. We’re in this business for a long, long term, right? So we really look at pricing strategically,” he said.

Counterintuitive?

Krispy Kreme’s premium products campaign will depend on “whether consumers recognize that value and are willing to pay for it regardless of the timing,” said Roger Beahm, executive director of the Center for Retail Innovation at Wake Forest University School of Business.

“While introducing a new premium line of products during these economic times seems counterintuitive, the added benefits the products can bring to consumers, coupled with the financial benefits that can be realized by the company, makes sense.

“Not doing so risks leaving money on the table.”

Beahm said that, with inflationary pressure, consumers are rethinking many of the brands and products they are buying.

“They are looking to reduce the overall impact of inflation by purchasing lower-cost national brands or store brands that still meet their basic needs,” he said.

Yet, Beahm said, there’s a path for Krispy Kreme to successfully introduce the premium tier products.

“Krispy Kreme offers products that are considered by most as affordable treats,” Beahm said.

“Even during the toughest of times people like to treat themselves, at least on occasion, with an affordable luxury.

“At the price points Krispy Kreme products sell for today, even a new premium line will likely be seen in a similar manner.”

Beahm also said introducing a premium product could attract new customers and raise brand awareness.

“Krispy Kreme’s introduction of this new line should further differentiate the brand favorably from its competitors,” Beahm said.

“An advantage of introducing a new premium tier of products — versus simply upgrading its current products and raising prices to cover the upgrade — is that it allows current customers to choose between staying with their current product or trading up.

“This minimizes the risk that only upgrading the current offerings, with a commensurate price increase, would drive some customers away altogether.”

Ice cream, milkshakes

“We are even testing ice cream and shakes as we think about unique ways to drive additional frequency,” Tattersfield said, referring to the original glazed soft-serve ice cream that debuted June 21.

The ice cream is sold in cups, cones and milkshakes. The cones are all waffle cones made with doughnut batter. The product is available in just 10 U.S. test markets, including stores in Winston-Salem, Clemmons, High Point, Greensboro and Burlington.

“Like the hand-cut cinnamon rolls and these new fritters, they will command a higher price,” Tattersfield said.

Tattersfield said Krispy Kreme is driven to present “fresh and buzzworthy offerings.”

Insomnia Cookies

Tattersfield said the company “sees tremendous long-term potential for Insomnia Cookies as it increases its global (reach) and grows beyond college campuses and urban markets.”

There are 221 Insomnia outlets as of June 30.

He said Insomnia treats are being tested in suburban locations “with continued product innovation.”

Tattersfield acknowledged a challenge to introducing new treats is that “consumers faced unique economic pressures” during the second quarter. That includes the summer heat wave in the United Kingdom driving down customer traffic.

Tattersfield said Krispy Kreme should benefit from additional revenue in the third quarter from raising prices in the U.S. and United Kingdom markets.