Storm in a doughnut over pricing

Storm in a doughnut over pricing

A top doughnut brand's entry into the Singapore market has created a buzz. But, for now, the discussion is not focused on the taste and texture of the famous doughnuts.

Instead, many consumers want to know why they are paying twice as much for a bite as their American counterparts.

Krispy Kreme made its local debut here on Oct 12, with an original glazed doughnut priced at S$2.60. The same doughnut retails at US$0.99 (S$1.20) in the United States and RM2.50 (S$0.98) in Malaysia.

A dozen of the glazed doughnuts here cost S$23.40, but they go for A$15.95 (S$19.10) in Australia.

Krispy Kreme is in good company. Hong Kong dimsum eatery Tim Ho Wan and Sichuan hotpot chain Hai Di Lao Hotpot also charge more in Singapore than in other places.

Tim Ho Wan's baked bun with barbecue pork costs S$4.50 for three pieces in Singapore. The same item costs HK$17 (S$2.72) at the Shan Shui Po branch in Hong Kong. Hai Di Lao's "yuan yang" hotpot is S$16 here, but is 49 yuan (S$9.96) in China.

Welcome to the complicated mathematics of franchising.

Krispy Kreme's Singapore franchise owner, Mr Andy Chaw, said the high prices are due to all the doughnut's ingredients being flown in from North Carolina, where the company is headquartered.

He told My Paper that some franchises in the Asia-Pacific import only some of the ingredients and mix them with locally sourced flour for "cost savings".

Mr Chaw, the chief executive of Star 360 Holdings, said the Singaporean food audience is a "discerning one" and the company wants the doughnuts sold here to be "exactly like what you would get in the United States".

The franchisee also pointed out on Facebook that the price of a doughnut falls to S$1.95 each when customers order by the dozen. The explanation drew mixed responses.

Doughnuts from J.Co and Dunkin' Donuts start at S$1.70 each.

One user claimed that the doughnuts sold here cost more than the ones "in expensive places like London" and wondered if the prices here are the highest in the world. But others urged consumers to "cut them some slack" and to look at costs such as high rentals in Singapore.

Experts also point to other reasons why famous food offerings cost more in Singapore.

Mr Gary Loh, director of PurpleClay Consulting, a company specialising in franchising and branding, said prices may vary across markets because of factors such as franchise fees and initial investment costs.

High prices can also be strategic. Mr Albert Kong, chief executive of Asiawide Franchise, said: "A company may want to position (its doughnut) as...the doughnut that people should eat."

Some brands might also price their products high to be seen as a "premium" brand, said a franchising expert, who declined to be named.

Mrs Hsien Naidu, director of Astreem Consulting, said franchisers also need to consider the standard of living of the people in a particular market, before entering one.

Mr John Ong, chief executive of FT Consulting, pointed out that high rents here and the current labour crunch will take a bite out of profits too.

Consumers Association of Singapore executive director Seah Seng Choon said that price differences across markets should be justifiable.

Whether Krispy Kreme passes this test will be decided by consumers, who will put their money where their mouth is.

Still, for some consumers, like corporate communications executive Kenneth Goh, price will not be an issue.

When asked why he will buy the doughnuts here, the 25-year-old said: "I'm tired of (getting) soggy Krispy Kreme doughnuts when I ask my friends to buy them on their overseas trips."

myp@sph.com.sg


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