Donut Empire Savours Taste of Success

FF Fashion

Thu, Jan 01, 2009
The Business Times
By LYNETTE KHOO



PLENTY of Singaporeans love doughnuts, and demand for the tasty treats has spurred the growth of doughnut chains here.

That's why Donut Empire has made branding its priority to stand out from the crowd.

From a slim war chest of $200,000 to begin with two years ago, a substantial $130,000 was spent on advertising and promotion. And to turn itself into a household name, Donut Empire chose to start from the heartland.

Unlike other doughnut chains that started out in upmarket shopping malls, Donut Empire opened its first shop at Tanjong Katong near three schools, and its second at Causeway Point in Woodlands. This meant savings on rent.

'We didn't have a lot of capital so we needed to adopt a different strategy,' says Donut Empire CEO Sky Chiew, who recently won the Spirit of Enterprise Award 2008 for his entrepreneurial success with the chain.

The heartland move turned out to be a good one - the group's name was built up just three months after its Katong shop.

Donut Empire is now working on an aggressive expansion plan involving three new shops - at Jurong Point, Northpoint and Far East Plaza.

Mr Chiew says he then hopes to open at least three to five more shops in Singapore plus at least 10 outlets each in Malaysia and Brunei. He would also like to enter markets such as China, Brunei, India, Vietnam and Cambodia.

He will continue to focus much of his energy on Dubai, where demand for doughnuts is high. Donut Empire will open new stores there via a joint venture to be formed with a Dubai partner.

But Mr Chiew is not about to start borrowing from banks to finance his expansion plans, especially given the tight credit conditions.

'All along we have not had any finance from banks because we are in a cash business,' he says. 'If we got debt we would have expanded very fast.

'But my style is that I don't want to owe people money or borrow money from the banks. All of our machinery has been fully paid for.'

Donut Empire has received grants from Spring Singapore and IE Singapore for branding, but Mr Chiew declines to say how much.

This year the chain exceeded its sales target. But start-up costs also increased with the opening of new stores.

The typical payback period for a Donut Empire outlet is about three months, Mr Chiew says.

To stay ahead of the competition, the company's R&D team continues to tap creative juices, churning out new types of doughnuts every couple of months.

For instance, it launched new doughnuts for the Christmas season to bolster sales, which slipped 5-10 per cent in November as the school holidays affected business at some outlets.

'We don't see this situation getting worse,' says Mr Chiew, who is optimistic despite the weak economic outlook.

Asked if a doughnut bubble is in the making, he replies with an unfaltering 'no'.

'A lot of people talked about the tea 'bubble',' he says. 'But we still see many of these stalls. It is the poor-quality ones that burst. The good bubble tea chains stay.'

Singaporeans have discerning taste buds and they go for quality, he says.