Specialist plans Krispy Kreme turnaround

CHARLOTTE, N.C. — Back in his Los Angeles college days, Stephen Cooper and his buddies would trek 1,000 miles across the Rocky Mountains to restock their coolers with Coors.

Decades later, Coors doesn't need a cult following to sell its six-packs, available at every corner store. That's a lesson Cooper thinks about often as the corporate turnaround specialist seeks to save troubled Krispy Kreme Doughnuts Inc.

Cooper, whose clients have included Enron Corp., believes the North Carolina purveyor of "Hot Now" treats counted on little more than its cult-like popularity to drive its success as it quickly expanded beyond its regional roots.

"You can't rely on word of mouth to keep expanding the circuit of very loyal customers," Cooper said.

But not too long ago, it seemed like that's all it would take.

The company started to open stores outside the South in the mid-1990s, and when a Krispy Kreme store arrived in your town, it was as if royalty had come to visit. Lines stretched for hours as people prevented by geography from eating a Krispy Kreme doughnut waited eagerly for a taste.

Investors were no different, snapping up shares with the fervor of transplanted Southerners denied their doughnuts. From an initial offering at $21 a share in 2000, the price rose to $105 later that year before a pair of two-for-one stock splits. Krispy Kreme opened nearly 400 stores across the U.S. and as far away as England and Australia.

The ease of that success, Cooper believes, was the problem. Instead of focusing on running an efficient operation in an industry with razor-thin margins, he said, the executives at the Winston-Salem-based company were enjoying the glow of their rapid expansion and rising stock price.

"You have to be able to make the transition from being a word-of-mouth, kind of myth-driven marketing company into one that has a much more structured, objective-driven sales marketing program," Cooper said.

That didn't happen, and today, the number of Krispy Kreme stores stands at less than 350, with plans to close even more. Shares in the company have fallen nearly 90 percent from their 2003 peak.