Retailer Krispy Kreme Doughnuts is releasing a new “mini-doughnut” menu item and running a sweepstakes to help promote it.

The new mini-doughnuts are about half the size of traditional doughnuts and come in three flavors. From April 27 – May 31, 2009, customers who buy mini-doughnuts at a participating Krispy Kreme store will receive an online entry code that gives them a chance to win a new 2009 Mini-Cooper, writes Retailer Daily.

Rival coffee retailer Dunkin’ Donuts recently ran a doughnut-themed promotion offering a $12,000 prize to the customer who created the best personalized doughnut.

Krispy Kreme and Dunkin’ Donuts are focusing on the food side of its menu at a time when many of their competitors are looking to boost revenues with breakfast. Last month month, Starbucks launched a breakfast pairings menu that features a selection of coffee and breakfast food pairings for $3.95 plus tax where applicable. In addition, Wendy’s recently added breakfast wraps, Burger King introduced miniature breakfast sandwiches, and McDonald’s credits sales of Egg McMuffin breakfast sandwiches and hash browns, as well as coffee, for lifting sales in 2008. Burger King obtains 15% of its sales from breakfast items while breakfast constitutes about 25% of McDonald’s sales and 40% of its profit.

In January, Dunkin’ Donuts launched a $100 million-plus integrated national advertising campaign called “You Kin’ Do It!” Expected to run throughout 2009, the campaign will include TV, radio, print, online, and outdoor advertising, in addition to in-store point-of-purchase, special events, sports marketing, and other online marketing initiatives.

While it lost money, Krispy Kreme saw overall improvements in its financial operations during fiscal 2008. For the year, the retailer’s net loss shrank from $67.1 million to $4.1 million, and during Q4 2008 Krispy Kreme’s net loss shrank from $31.8 million to $303,000.

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