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SCMP Reporter

The doughnut may be a distinctly American snack, but it has taken a joint venture between two Japanese companies to bring the tasty treat to Shanghai.

Mister Donut, a 120-seat emporium of pastry and coffee, opened its doors on the city's fashionable Huai Hai Road last month.

The shop represents a US$2 million gamble by partners Osaka-based Marujin and Duskin Foods.

However, said assistant general manager Peng Guorong, that is merely a sprinkling of flour from which some serious dough is going to be made.

If all goes according to plan, Mister Donut will begin franchises in Shanghai and around the mainland within three years. Not even Kentucky Fried Chicken, which has 58 outlets in the city, has moved towards a traditional backbone franchise operation.

The risks are great, Mr Peng said.

The company is trying to parlay its experience from franchising 1,200 doughnut shops in Japan and 800 shops in Australia, Indonesia, the Philippines and Thailand into a successful mainland venture.

The market Mister Donut is entering is littered with failed foreign food and retail ventures.

Among the most recent casualties are ParknShop, whose Hong Kong backer, Hutchison Whampoa, earlier this month decided to sell its stake in 14 outlets after six years of operations. Notably, the company that bought the shares, Shanghai Dingdingxian Supermarket, rose last year from the ashes of Royal Ahold's Tops brand chain.

Last month, Hong Kong entrepreneur Frank Lo Kit-lum also called it quits, selling Printemps Department Store to a government-backed retailer after failing to turn around the store's fortunes.

Other retailers are faring no better. Competition has forced Shanghai Number One Department Store to sell its supermarket division, Shanghai Orient Price Club Chain, to industry leader Lianhua Supermarket; and earlier this week Shanghai Jiuzhou Department Store announced it was looking to lease its flagship after closing and transferring operations at three smaller locations.

Even the venerable doughnut, which was first introduced to mainland coastal markets five years ago, has been unable to attract sticky fingers.

Massachusetts-based Dunkin Donuts, which operated five outlets in Beijing, pulled out earlier this year after failing to find a market for its coconut, chocolate and custard cream treats. In Shanghai, two unrelated Taiwan doughnut shops continue to struggle to find customers.

The Dunkin Donuts debacle has given Mister Donut some food for thought, Mr Peng said.

'They were ordering from many different bakeries, which meant the quality of their product was never consistent, and the atmosphere in the shops really didn't make people feel like eating doughnuts.' Most importantly, Dunkin Donuts kept its product on store shelves too long.

'Nobody wants to eat a doughnut that's been sitting out all day,' Mr Peng said. Mister Donut throws out anything on the shelf longer than eight hours.

He believed attention to detail should make the firm a contender in the city's 11 billion yuan (about HK$10.2 billion) a year restaurants and snacks market.

Mr Peng also said Mister Donut had years of experience in Asia. Among its 58 doughnuts are the French Cruller and Old Fashioned. The salty Shrimp Gratin doughnut also is proving a big hit.

However, with prices starting at four yuan and apple pies at eight yuan, it remains to be seen whether Mister Donut can bite into the market.



Mister Donut expects big bite of mainland market when treats hit the streets