Krispy Cream Donuts is going to be purchased for one point three or five billion dollars. The purchase by Austria's billionaire Ryman family. Well, they'll be adding to Pete's Coffee as well as Kurg Green Mountain. A lot of glazed donuts coming to those brands. Perhaps, let's find out more from Michael Halen. He is senior restaurant analyst for Bloomberg Intelligence. Michael, So,
this is like the complete breakfast now, right, coffee and doughnuts. Although, and I'm looking at the Crispy Creame website you have to scroll down to even see a donut. Now, this is about coffee and sugary drinks. Yeah, it is about coffee. And although Krispy Kreme has you know, hasn't had a
ton of success increasing their coffee sells. Um obviously, j ABC is a significant opportunity here, um, you know, to to use their expertise to help Krispy Creme, you know, expand coffee seals not only in their stores, but but in the retail channel. Why are they so interested in these coffee and consumer brands. Well, coffee makes a lot of sense because it's growing faster than other packaged foods
in the US and across the globe. You know, we're talking about UM growth rate in the mid single digits, So it's a very attractive business. Um. It's typically very high margin, especially at the store level. Um. You know, and you know, they've made a lot of acquisitions, so so they're purchasing power is increasing, and they're going to gain some leverage on their coffee buys, which should help
margins across the organization. Now, J A. B. The company that is purchasing Crispy Cream, already owns Caribou Coffee, Einstein Noah Restaurant Group, as well as a variety of other restaurants that perhaps some less familiar to many listeners. But is this a plan just to push into the restaurant business the coffee business? What what exactly are they coming up against Starbucks? It's mainly it's mainly for the coffee business. You know, we don't get a ton of information right
because it's privately owned. But from what we can tell, it's mainly through uh, you know, growth of the coffee business and the coffee brand. So, you know, Krispy Cream has put a lot of effort into you know, they have a very strong brand, and they've been putting a lot of effort into Krispy Kreme branded drinks UH and J. A. B.
Sees that as some low hanging for it. They think they can they can take Krispy Cream beverages, UM, expand the distribution, UM, get a greater attachment rate in the stores, UM, you know, and and UH increased sales and origins. How do you do a back of the envelope valuation for a company like Crispy Cream Donuts. One point three five billion is the estimated value of the deal. Sure, So
it's interesting. So they're paying us, you know, almost seventeen times on an even Ebada basis based on this year's consensus Ibadan number, which some may say is kind of aggressive, but that's what they've been paying. That's what they paid
for Pezze, That's what they paid for Caribou. And what's interesting is they're kind of discipline, so you know, you know, for example, Krispy Kreme has been rumored to be in the work since but with Krispy Kreme, Caribou, Pezze, UH and even curing all of the company, the target stock
UH dropped precipitously before J. B. Made the offer. So although it may seem aggressive at you know, sixteen point eight times forward ibada UM, you know, this may be a trophy ibadan number that that it's based off of. So it's interesting because they showed discipline, UM, but they seem to strike when they feel the opportunity is right and they place a bid that doesn't seem to that you know, may not get any UM competition. Point to
you about valuation. Are there other companies that that if you are invested in Krispy Kreme for just this type of situation, are there other brands that you would also pay attention to? Well, there's there's it's a dwindling numbers. J B has been very busy over the last four years. But um, there's only two left really that are publicly traded. We got Starbucks and Duncan brand. Starbucks doesn't make any sense.
There are eighty three billion dollar market cap. Is is uh significantly larger we think than j a B. Duncan makes sense on a certain level because you know, the business model with the restaurants and a strong consumer branded retail business UM is very similar to Cariboo and Pezza and the other companies in the portfolio. They have stores,
so they have a ubiquitous presence. But it's almost a hundred percent franchise, so it the presses the market cap of the company, it's only four point three billions, so uh, you know, you can you know, they maybe they may decide they want to purchase this brand and they might be able to get at a manageable price because of
the franchise nature of it. You know. That being said, there's you know, there isn't the same amount of low hanging fruit like there were at at Crispy Cream and then at Pete and Cariboo, which were kind of regional and struggling to expand. So they don't really have the low hanging fruit here with Duncan doughnuts. Um. So if they are interested, they may remain patient. You know. Like I said, they pay about sixteen to seventeen times off for their targets. Uh, Duncan is at fourteen and a
half times. Um. It may be too rich for this their blood at this time. Hey, my cloud want to I I know you maybe not primed for, but I've been reading your stuff on Sonic and I just find this to be a very interesting uh company. Uh, Sonic you believe has the opportunity to increase their average unit sales. And I'm wondering whether that has anything to do uh
with at least stable, if not less expensive gasoline prices. Yeah, so they think they can do that, uh irrespective of what gasoline prices do, I'm And obviously lower gasoline prices will give their lower income consumers, um, you know, more pocket change and more money to buy Sonics burgers and talks and and all that good stuff line maids, you know, you name it, um, and it could give them a
boost should gasoline prices remain low. But Sonic thinks they can increase those average una violnes by even without help from gasoline. And and what gives them confidence is that, you know, their best sites in their best restaurant in the best sites are doing significantly higher volumes. So, uh, it's to me they may be, you know, maybe getting a little bit more comfortable with their restaurants selection methodologies and could be giving them the confidence to to set
such a to set such a lofty goal. Thanks very much for spending time with us. Michael Halen is senior restaurant analyst for Bloomberg Intelligence.