THE MANNY PACQUIAO OF THE DOUGHNUT WORLD

MANILA, February 2, 2004 (STAR) By Lisa Gokongwei-Cheng - Watch out, Krispy Kreme. All-Filipino Go Nuts Donuts could just be the Manny Pacquiao of the doughnut world.

For Pinoy Krispy Kreme fans, the long wait is over. The melt-in-your-mouth doughnut that made the retailer a household name in the US is now in the Philippines. Hereís the twist. Itís brought to you by an all-Filipino group called Go Nuts Donuts.

Their month-old shop at Fort Bonifacio is doing brisk business. Word-of-mouth keeps the crowds coming and then coming back. The single branch sells more than 10,000 donuts daily. Franchising inquiries are non-stop. The major malls have come calling. Finally, media hounds (this writer included) are harassing the owners for exclusives. The only problem is the price. At 15 bucks per doughnut, the same price as a Dunkiní and half the cost of one from Starbucks, customers complain itís too damn cheap.

"They get angry," says Francis Trillana, chairman of the group. "They say that the market can afford so much more."

He uses irony to make a point. "This is a premium product with a mass price," he explains. And indeed it is. The doughnuts are as popular with the rich folk who live around The Fort as they are with the regular Joes who actually work there as security guards, construction workers and household help.

Michael Trillana, Francisí son and the group president, says, "Amos send their drivers to buy. After they buy their amoís three boxes, they buy three doughnuts for themselves." Michael says that the average basket size of Go Nuts is a dozen and that 90 percent of their sales are pasalubong and takeout.

Their doughnuts are so popular people donít really mind the long wait. Long lines grow because customers like to take their time choosing from the various flavors available. To address the problem, Go Nuts experimented by placing an express lane where customers could buy doughnuts pre-packed. They sold 23 pre-packed boxes on the day of the experiment.

"Part of the fun is choosing and changing your mind," says Michael. "Like when youíre in a doctorís office. You donít mind the wait, but when itís your turn, you want full attention." They removed the express lane after one day.

The Go Nuts doughnut is of the yeast-raised variety, which accounts for its "new generation, softer and lighter, melt-in-your-mouth" texture. Meanwhile, the stuff we grew up on and brought to every sick auntie and office party is of the cakey variety, the ever popular chocolate Munchkin being a prime example.

The Trillanas, the family whose Coney Island gave us bubble gum ice cream almost 30 years ago, want to break into what he estimates to be a P4.5 billion to P6 billion doughnut industry, dominated today by the omnipresent Dunkiní Donuts and the contender Mr. Donut.

"Itís a huge market dominated by two players doing the same thing Ė mass-produced and mass-marketed doughnuts," Francis says, referring to the fact that these doughnuts are churned in commissaries and then farmed out to hundreds of stores around the country. "But doughnuts are fun. Thereís no more fun product than a doughnut. We wanted to rejuvenate the category."

They wanted a doughnut that was hand-made and then sold freshly-made.

So, despite the huge risk of going against giants, the Trillanas and partner Noel de Ocampo, decided to have a go at it. At first, Michael contacted Krispy Kreme to inquire about a franchise. (He first tasted the Krispy Kreme doughnut as a student in New York.) No response. So, they decided to do it on their own. After all, they not only were experienced in food retailing, having created Coney Island, they also operated a consumer food business. Their Filia Food produces Whammos, a product patterned after Hostess Twinkies.

It took two and a half years to launch. Daughter Christina, a graduate of the Culinary Institute of America, worked with American technology partners to develop the perfect product Ė described by her dad as something with a wow factor. What came next was a barrage of consumer testing. Besides the usual consumer panels and focus groups, they sold samples at Christmas bazaars under the brand Happy Donuts. But the turning point came when testers at a university chose their doughnut over brand X nine-to-one. This gave them the confidence to open their store, just a week before Christmas. And suddenly, theyíre being compared to Krispy Kreme, the doughnut wonder.

No wonder. Even their stores are alike. Go Nuts employs the same doughnuts-as-entertainment strategy of Krispy Kreme. The outlet, which is called a theater store, allows customers to watch how the products are made from start to finish as opposed to the commissary-to-store way of doing things.

"There is the quality assurance people get from seeing the doughnuts being made," explains Michael. But mostly, itís the show. "Especially to kids, each step is a magic moment."

But theyíre also the first to say theyíre different from Krispy Kreme. "Like Coke and Pepsi, thereís a distinct flavor difference," says Francis, who is also chairman of Lowe, the advertising agency. He is a marketer at heart and thus big on unique selling propositions.

"First, Go Nuts is less sweet than Krispy Kreme and deliberately so," Francis says. They learned from their consumer panel that a less sweet doughnut would lessen the nakakaumay factor

"Second, we have a slightly bigger doughnut because people will look for value." Go Nuts is thus 20 percent bigger than a Krispy Kreme doughnut.

"Third, we removed the lemony flavor." Francis explains that most American cakes and pastries have this flavor that Pinoys donít like.

"Last, our doughnuts last longer." Ordinary doughnuts have a shelf life of 11 hours. They claim that Go Nuts doughnuts have a shelf life of three days.

Which begs the question, what will happen when the Krispy Kreme does enter the market?

While Krispy Kreme is already in Australia and New Zealand, the younger Trillana thinks that the Philippines is not a priority market. "Itís in their website that Taiwan, China, Japan, Korea and Singapore are their priority."

Besides, when they do enter, Go Nuts will have a price advantage, they feel.

And whatís going to stop Go Nuts from venturing overseas themselves?

The older Trillana is not shy to say that his company is Asia-bound. "The Philippines can be competitive. We have good brands that have gone overseas, like San Miguel. We have good products and good people. We are looking for the vehicle to prove it."

The Trillanas are not afraid that Go Nuts will go the way of pearl shakes, shawarma, and lechon manok.

"When we open more stores, will we still expect the same long, long, kilometric lines?" asks Francis. "No. But, doughnuts are comfort food. Like coffee. In the ad agency, when we give our staff donuts, theyíre okay for another 10 hours."

Michael adds, "Doughnuts are rewards. Inuuwi sa pamilya. Itís better than bringing home a box of hopia or mamon. Itís special. Like bringing a little of America home in a box."

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Go Nuts is planning to franchise by the end of the first quarter. E-mail Michael Trillana at mot@i-manila.com.ph However, they are very strict with their requirements and will only give franchises to people willing to put in a lot of work themselves.

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Please write to lisa.gokongwei@summitmedia.com.ph for any story ideas on interesting entrepreneurs.


Reported by: Sol Jose Vanzi

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