Rise and fall of a doughnut

February 18, 2010

Andrew Marr had one, but, unlike Rosie O’Donnell, didn’t enjoy it. Cynthia Nixon and Renee Zellweger both had theirs. So did the G8 leaders at this year’s summit on Sea Island, Georgia. In London, you are nobody now unless you are leaving Knightsbridge with the fashionably retro, green-and-white box in the back of your 4×4. Friendships are warmer. Life is tooth-achingly sweet. You have just had your first Krispy Kreme moment.

The Krispy Kreme doughnut, a relatively cheap and surprisingly humble-looking US import, first blipped on to the British radar when it was immortalised in Sex and the City. Soon after that, the doughnut became available at an outlet in Harrods. Like Starbucks, it seemed the chain was culturally and nutritionally here to stay. New outlets came to Canary Wharf and, less glamorously, to Enfield and Watford. A further 26 stores were on the drawing board, and footballers’ wives demanded that doughnuts be couriered to parties as far afield as Manchester and Liverpool.

Bemused, long-standing customers in the Bible Belt found that their doughnuts came loaded with a blue-collar cool that appealed across America, Europe, and eventually as far as Australia and Asia. The number of Krispy Kreme stores tripled, and when the company went public in 2000, profits skyrocketed to heights surpassed only by the sugar levels of anyone sampling its products.

Krispy Kreme began life in 1937 as a single bakery in Winston-Salem, North Carolina, which sold doughnuts through a hole in the wall. For years, the firm stayed local; then, in the 1950s, Krispy Kreme opened its own plant and launched its dedicated brand. It was on the way to becoming less a snack, but more the place where memories happened.

“I guess it was always warm, with lots of chatter,” says Jack McAleer, whose father, Joseph, owned the first franchise in Alabama. “In the Fifties, the men would be in the back making the doughnuts. There would be these hexagonal cookie-cutters because you couldn’t get round ones. And the women would be in front serving, all in their white dresses.”

After a slump during the 1970s when Krispy Kreme was sold to Beatrice Foods – McAleer calls them “the dark years” – Joseph McAleer launched a buy-back with several other original franchise owners, and sought to rebuild the company. The chain expanded by word of mouth, with adults suddenly remembering their Krispy Kreme adolescence – the family surprise parties, the Sundays after church. Jack McAleer, now company vice-president, admits that much of the firm’s appeal relies on “capturing that time in America”.

This is confirmed by a visit to a Krispy Kreme outlet in Greensboro, North Carolina. The local fire engine has parked up outside a low-built, squeaky-clean eatery, while inside a handful of locals are waiting for the first hot doughnuts of the day: a white Southern matron, a black man in a baseball cap, a dead-eyed girl behind the counter. A steady stream of people fills the shell-shaped cream booths, and customers munch away under the same 50-year-old photos now reproduced across the globe.

It would be easy to believe that Krispy Kreme is a company still on top, but lately things have gone badly wrong. This summer, just as store after store was opening to ever more fanfare, ugly rumours began to surface. In May, KK announced its first profits warning – blaming the low-carbs, Atkins diet craze – and slashed its 2005 earnings forecast by 10 per cent. In Britain, tabloids claimed that cut-price offers to schools were “pushing” products as “addictive as crack cocaine” to children.

For a company that prides itself on the transparency of its processes (all Krispy Kreme outlets have a glass wall so that customers can watch their doughnuts being created), it came as a shock when the US Securities and Exchange Commission announced in the autumn that it would be conducting a formal investigation into some very unclear accounting practices.

Krispy Kreme stock quickly lost 75 per cent of its value, heads rolled, and Fortune magazine declared that it was no longer the “hottest brand in the land”.

So has Krispy Kreme fallen into a hole all of its own? Not quite. As the company regroups, the legend is far from over. First, while competitors such as Dunkin’ Donuts may have been better equipped to cope with the low-carbs crisis, none has the Krispy Kreme chic. At polling stations in Wisconsin on 2 November, it was Krispy Kreme boxes that young Democrats used to weigh down their exit papers, and when Krispy Kreme opened its doors in Washington, DC and Sydney last year it was to lines of people who had queued all night.

Their eventual verdict? “Nice,” said a Peace Corps volunteer who had waited two long years for her first Krispy Kreme experience.

Back in Greensboro, two friends finally get a booth. They each order a doughnut, plain and glazed. It’s been some time since they last met, and there is much to discuss. What do the doughnuts taste like? “I like the cake kind,” the man says. “The other ones are too insubstantial.” They’re a little fluffy, his friend agrees. But this pair are enjoying their Krispy Kreme moment, none the less.

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