I love donuts.
I’m especially partial to mini cinnamon sugar. Oh, and donuts branded as “Floopy’s” that I can find at any Lidl location here in Spain.
You know who else loves donuts? McDonalds.
So much so that Krispy Kreme and McDonalds engaged in a brief love affair.
However, this entanglement is a demonstrative example of how a DTC brand can fail in a wholesale partnership.
Brands pursue wholesale for access to consumers that they cannot reach on their own. Krispy Kreme has said repeatedly that widening access is its central challenge. As such, it re-jigged its hub-and-spoke supply chain to serve retail/grocery, c-store and, eventually, restaurant partners. McDonald’s has roughly 13,600 locations and that could mean a lot of access.
Retailers curate assortments from multiple brands and private label programs. Gaps in the assortment can be filled via selective partnerships. Although McDonald’s is not a multi-brand retailer, the logic still applies here. After trimming its McCafé pastry range, the chain still wanted an item to drive transaction sizes with a coffee purchase. There was a gap in the assortment and Krispy Kreme’s donut can be slotted in.
A nine-store pilot in Louisville expanded to 160 Kentucky restaurants by March 2023, with both companies claiming demand “exceeded expectations.”
(Not like the companies would publicly say anything to the contrary.)
The success turned into a nationwide agreement in 2024.
However, this ended up being a financial sink hole and the partnership was formally terminated on June 24th, 2025.
Here are three reasons why there was a major hole in this donut:
1 – Not all wholesale partners are created equally. Krispy Kreme selling a “super dozen” at Costco or an assorted 6-pack at Target doesn’t mean success in selling a single, fresh donut in a QSR setting. Different partners aim to serve different customer segments. Also, the requirements of doing business with a retail partner are different that a QSR one.
2 – Costly access. Krispy Kreme took on unfavorable financial terms which eventually made the partnership untenable. The cost of twice daily deliveries and end of day pick up for the unsold donuts added up quickly. Also, McDonalds pinned the cost of unsold inventory back on Krispy Kreme. In a similar manner, retailers can pin markdown dollars back onto a brand.
3 – Wholesale is marketing for DTC. If a customer has never tried Krispy Kreme before and picks up a donut from McDonald’s that is stale or complains about the $2 price point, that’s not good marketing. As we see in apparel, footwear and other categories, wholesale and DTC work in tandem with one another. Often, wholesale is an excellent marketing vehicle that drives success in the direct channel.
For brands, it’s not about getting on the shelf, it’s about staying on the shelf. Getting access to access is merely the starting point. The access needs to be exploited for a meaningful period of time.
For Krispy Kreme, their short-lived tenure with McDonald’s won’t be fatal and will serve as good learning.
Perhaps the main lesson is that the “hot and fresh” proposition should stay direct while the “enjoy at home” proposition is best supported by retail partners. These can work hand in hand with one another.
That’s the thing about this direct vs. wholesale dynamic, there isn’t a singular, correct answer.
That’s what makes it fascinating.
