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CNN Today

Krispy Kreme IPO a Tasty Investment

Aired April 4, 2000 - 1:22 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

LOU WATERS, CNN ANCHOR: Even if it's -- as we keep track of this shaky market today, we can report to you an investment opportunity for you borne of a little, sweet-tasting donut that's been around for many decades.

DONNA KELLEY, CNN ANCHOR: CNN's Lauren Thierry serves up the Krispy Kreme IPO. Maybe it's quite possibly the tastiest investment of the year.

(BEGIN VIDEOTAPE)

LAUREN THIERRY, CNN CORRESPONDENT (voice-over): Kripsy Kreme, a down-home donut with a tantalizing appeal. From its Southern birthplace to the sophisticated sidewalks of New York, this delicacy has left a trail of sweet success. Customers become fanatics and cash registers keep on ringing.

ROGER BERKLEY, KRISPY KREME DEVOTEE: A hot Krispy Kreme dissolves in your mouth and explodes with flavor. I mean, that's the only way I can put it. It just goes whoosh.

THIERRY: Krispy Kreme's founder, Vernon Rudolph, knew a good thing when he ate it. He put his money where his mouth was and bought the original doughnut recipe from a Louisiana Frenchman. In 1937, Rudolph set up a wholesale doughnut bakery in a small Southern town and sold his product to local grocery stores.

SCOTT LIVENGOOD, PRES., KRISPY KREME: The product became so popular so quickly that people started coming to the store and trying to buy doughnuts at the store. And so they cut a little window like a -- almost like an old bank teller window, and people were allowed to come up and buy doughnuts out of the front of the store.

THIERRY: In less than a year, Krispy Kreme was a success, so Rudolph built more shops in neighboring towns. He always enclosed the cooking area in glass, creating a donut theater. In the '60s, Krispy Kreme found its signature style -- the retro look that complements its nostalgic appeal.

Vernon Rudolph's family sold the enterprise in 1976 after the founder's sudden death. Beatrice Foods had a reputation for respecting regional food companies and letting them be themselves. But Beatrice soon proved that bigger management wasn't better management. Company execs altered the magic recipe and used cheaper ingredients. Non-traditional foods showed up side-by-side with the donuts and coffee. Customers didn't approve. Sales tumbled.

Franchisees saw that the new strategy was destroying the product and the company.

LIVENGOOD: Our franchisees in 1982 bought Krispy Kreme, and it was a great day in the life of Krispy Kreme.

THIERRY: Livengood and his colleagues studied the elements behind their successful stores. When they felt it was right, they opened three more stores, then many others, even taking on New York City.

HOWARD LEV, PRES., NY FRANCHISE GROUP: We were worried whether or not anybody would know who we were when we started.

LIVENGOOD: Krispy Kreme has enjoyed a level of success as it's gone into new markets in ways that we could not have predicted.

BERKLEY: Can't miss this, folks. Just can't miss this. This is better than sex.

THIERRY: With more than 140 stores causing mouth-watering reactions across the country, Krispy Kreme is sticking to its knitting, seeing no reason to tamper with success.

LIVENGOOD: Krispy Kreme wants to be America's favorite donut for a long time, then it wants to be the world's favorite donut.

THIERRY: Lauren Thierry, CNN Financial News.

(END VIDEOTAPE)

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