Yet Another Dang Chapter
August 1, 2005
Yet Another Dang Chapter
By Dan Malovany
If I could write a final chapter on any two stories, they would be on Atkins Nutritionals and Krispy Kreme Doughnuts. Both of these companies are the Freddy Kruegers of fads. Just when you thought they’re finally dead, they pop up again and again, prompting intelligent people and even “dumkopfs” like me to say, “Ahhhh. They’re back!”
In perception, the two companies can’t be more different. Atkins represents a new carb consciousness, while Krispy Kreme exemplifies indulgence. Atkins’ products taste bad, while Krispy Kreme’s hot glazed donuts are to die for, well, just figuratively.
In reality, however, both Krispy Kreme and Atkins have a lot more in common than not. Atkins, like Krispy Kreme, promotes a diet high in fat that is basically not healthy if consumed in mass quantities.
During their heyday, both marketing machines played the media like puppeteers, stirring up a frenzy of positive publicity and cashing in on their luck in more ways than one. They also convinced fast-buck-seeking investors to ante up during the peak of their popularity, only to see the investments wither away.
Today, both businesses have filed for Chapter 11 reorganization, are bleeding red ink and are being run by turnaround experts who are promising that the companies will return with a renewed focus.
They also have credibility problems. Krispy Kreme’s issues came after it started selling donuts that were not always hot and fresh from the fryer, especially when they sat in supermarkets for hours. As a result, the charm that made Krispy Kreme successful lost its bloom.
Atkins, meanwhile, sold overpriced products that, again, tasted awful. The business situation got so bad late last year that its unsold low-carb products were being shipped to food banks in Kentucky and other parts of the Appalachia. That’s just cruel, man.
The new management teams are both re-engineering their businesses to be smaller but stronger than ever, which may be easier said than done.
In Atkins’ case, the company is reportedly hundreds of millions of dollars in debt and faces fierce competition from Kraft, Kellogg, General Mills and other large companies with incredibly huge advertising budgets who are producing more healthful products that taste better than anything Atkins has put out.
Atkins’ new goal is to be a niche player, producing energy bars, protein shakes and other products geared at health enthusiasts. If the geniuses at Atkins ever try to play in the big leagues again, expect the corporate giants in the food industry to react quickly with new products to squash it like a bug.
Ironically, Krispy Kreme’s former CEO once blamed its financial woes on the Atkins diet. In reality, the Krispy Kreme tale is turning out to be a sad story of greed, according to an internal investigation led by outside directors. Top executives at the company allegedly used shady accounting practices to pad the bottom line and kick in lucrative incentive programs, allowing them to cash in options for millions of dollars in stock, the investigation claims. Fortunately, those guys have left the company, but it has more trouble ahead.
Now the donut chain faces an onslaught of government investigations, investor lawsuits and disputes with disgruntled franchisees who are stuck with too much capacity, declining sales and competition from Dunkin’ Donuts, Tim Hortons, Starbucks and the suppliers of thaw-and-glaze donuts to the in-store bakery market.
For years, everyone asked when the Atkins fad would deflate. Like gas, it has passed, but carb consciousness still lingers. Likewise, Krispy Kreme’s bubble has burst, but it has a good product line and a brand that still brings smiles to most people’s faces.
Yes, it would be easy to write these two stories off, but as stupid as I am, I’ve learned one thing: Good stories never die.