Donuts take a bite from Asian fast food market

TAIPEI, Jun 11 (Reuters) Some of the world's top donut chains have come rolling into China, Taiwan, South Korea and Japan and elsewhere in the region as Asians embrace the Western fast food fad.

Chains like Krispy Kreme, Dunkin' Donuts and Mister Donut are setting up shop in a region not known for its sweet tooth, reflecting a growing openness to foreign foods and rising living standards, according to the chains and consumers who sometimes wait in line for hours for the treats.

In a twist on the common snack in the West, the chains say they are filling a growing demand for high-end treats that can double as gifts as well as snacks.

''They're pretty good. They're OK for you if you don't eat too many,'' said Ting, a teen-age school girl scanning the showcase at the first Dunkin' Donuts in Taipei on a recent afternoon.

Following its arrival in Taiwan late last year, the US chain now has five stores in Taiwan, and is aiming for 10 by year-end and 6 million dollar in sales this year.

''Our first store exceeded our targets, with average sales of 15,000 to 20,000 donuts a day,'' said spokeswoman Ivy Pai of Mercuries and Associates, Dunkin's Taiwan partner.

Dunkin' Donuts joins Japanese chain Mister Donut, a unit of Duskin Co Ltd, which entered Taiwan in late 2004 and plans to boost its store count there to 100 by the end of 2009, said Tadashi Kitami, president of the Taiwan operation.

Six months after entering Japan late last year, Krispy Kreme still draws crowds to its stores, following an early rush that saw hundreds of people sometimes waiting up to two hours to buy donuts, said spokeswoman Mayumi Jinji.

''We expected queues for about a month,'' she said. ''We didn't expect there to be queues for this long.'' Krispy Kreme is also making waves in nearby South Korea and Hong Kong, entering the former in late 2004 and the latter late last year. The Korean chain posted 30 billion won (32.4 million dollar) in sales last year, said spokesman Lee Heon Ho.

''I've read in the papers that the donut market is growing by 20 to 30 percent every year,'' Lee said. ''I think our 'open kitchen' appeals to customers the most.'' The rise of the donut in Asia reflects not only a growing openness to Western food in the region, but also rising affluence of consumers willing to spend a little more for extra treats beyond the daily rice box.

At the equivalent of about 90 US cents, donuts in Taiwan from Dunkin' Donut and Mister Donut are about 50 percent more expensive than those available in local bakeries, and three times the price of similar fare from street vendors.

''The market for gourmet foods here is becoming more mature,'' said Tadashi Kitami, head of Mister Donut in Taiwan. ''This is definitely related to people's living standards.'' He added that donuts in Taiwan are not only a one-off snack for many, but have also become a gift item, hence people's willingness to pay a little more.

In Hong Kong, donuts from Krispy Kreme go for about the same price, said Brian Parfitt of Catelo Investments, which has franchised the Krispy Kreme brand in Hong Kong.

''Other donuts are available here, but we see our product as a premium brand,'' he said. ''It's treated as a reward and is seen as a high-end luxury item. Price has never been an issue.'' In their Asia expansions, the donut makers admit to tweaking their recipes, much the way fast food chains like McDonald's and Yum Brands' KFC and Pizza Hut have added new products and emphasised certain foods to suit local tastes.

Dunkin' Donuts Taiwan menu includes such foreign flavours as green tea and honeydew melon donuts, while Mister Donut also offers green tea and flavours like strawberry and sesame.

One of the biggest differences is in sweetness, with many donut makers toning down their sugar content in a nod to Asians' generally lower preference for sweet foods.

''We have a donut now that's a semi-glaze donut, essentially half the glaze that makes it a lot less sweet,'' said Krispy Kreme's Parfitt.

Asian donut chains are also sensitive to the nutrition issue, hoping to avoid negative publicity associated with many of the Western fast food chains already in Asia.

Mister Donut hopes that flavours like green tea will create a more healthy image, while Dunkin' Donuts is relying on other items like sandwiches to round out its menu. In Hong Kong, Krispy Kreme reminds people to consume in moderation.

''We know it's not a product you should eat every day,'' said Parfitt. ''It's a treat that you should reward yourself with. It's not a meal replacement.'' REUTERS SKB SSC1338