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WORLD BUSINESS

Krispy Kreme seeks Asia sweet spot

From Eunice Yoon
CNN Asia Business Editor

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Each Original Glazed donut is 200 calories, and has 12 grams of fat.

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HONG KONG, China (CNN) -- It is said the Chinese have been eating donuts since the Song dynasty a thousand years ago.

At the Sun Fat Congee Shop in Hong Kong's Causeway Bay, Yao Tsee Sun has been serving sweet, deep-fried cow-tongue shaped pastries for the past 50 years.

But now Yao is in for some real American-style competition, from the Krispy Kreme donut -- a brand that has been tantalizing U.S. consumers for more than 60 years.

"Very good," he says inside his store on Canal Street, after taking a bite of the Original Glazed donut.

Krispy Kreme, which makes 2.7 billion donuts a year, opened a shop on Hong Kong's upmarket Lee Garden Road on Tuesday as it seeks to fill a hole in its balance sheet by expanding its global frontiers.

With sales sagging in the United States, the company is hoping Asians, with their growing wealth, will be tempted to open their wallets for a sweet treat often glamorized in American cop shows and movies.

Australian brothers and local restaurateurs Wayne and Brian Parfitt are running Krispy Kreme in Hong Kong and plan to open another 19 outlets over the next five years.

"What is going to be a big plus for Asia is that it's going to be a sharing food. You buy a dozen and you take them to the office. You take them to a family gathering, you take them to a barbecue. It suits the Asian way of eating," says Brian Parfitt.

North Carolina-based Krispy Kreme certainly hopes so.

The donut maker, once one of Wall Street's tastiest darlings, has seen its share price plummet due to America's low carbohydrate diet craze and an investigation into its accounting practices.

The company's problems back home are making the opening of this store, and others in South Korea, Tokyo and the Philippines, all the more important to its bottom line.

"People travel, they try the brand and they want to bring it back to their own country. So Hong Kong is an important stepping stone as we continue to expand into Asia," says Jeffrey Welch, Krispy Kreme's senior vice president for development.

But some people have said the donuts, which go by the names of New York Cheesecake and Caramel Kreme Crunch, could be too sweet for Asian palates.

In Hong Kong, the Parfitt brothers are on a campaign to prove otherwise, giving away nearly 20,000 donuts a day in the run-up to the store's opening.

"Have a donut, girls, don't be shy..." says Brian Parfitt, giving away more Original Glazed donuts in the packed streets.

The brothers seem to be winning over some fans in this bustling city of 6.9 million people perched on China's southern coast.

"It tastes good," says one old lady.

These are sweet sounding words for a company millions of dollars in the hole. They are hoping to make big bucks from sweet teeth across the border in mainland China.

"China is an important market," says Welch. "We need to make sure we go in there at the right time, with the right strategy and the right partners."

By using South Korea and Hong Kong as test-beds, they are looking to gain a foothold, understand the Asian consumer and take what they have learned into a nation of 1.2 billion people.

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