A sewage-pumping station should not smell like a Krispy Kreme doughnut.
In May 2004, inspectors in Fairfax County, Va., ran a camera through a sewer line.
It “got stuck in the grease, preventing inspection of the remainder of the line,” the county claims in a lawsuit it filed against the doughnut maker last month.
Krispy Kreme Doughnuts Inc. makes 83 million doughnuts a year at its Lorton, Va., plant, which is up-line from the sludge.
“Excessive quantities of highly corrosive wastes, doughnut grease and other pollutants” clog and corrode pipes, resulting in raw-sewage spills and system shutdowns, the county claims. It seeks about $2 million in damages and as much as $17 million in penalties.
Krispy Kreme says the claims are unfounded and that it’s been “over 99 percent compliant” with its effluent.
The dispute has been oozing for years. In April 2008, the county issued a cease-and-desist order, forcing Krispy Kreme to haul 15,000 gallons of doughnut goo to a treatment plant every day.
Krispy Kreme, founded in 1937, was in a mature industry when it went public in 2000, yet somehow it joined dot- coms on the list of the year’s hottest initial public offerings.
Remember those low-fat, low-carb or low-calorie diets? Not if you bought Krispy Kreme’s stock, which quickly surged above $50 a share.
Turns out, too many doughnut eaters were just cheating on their diets. They would eventually return to their waistline worries or discover that myriad other purveyors of deep-fried dough made for a better binge.
Krispy Kreme, which today has 536 stores, expanded rapidly on borrowed dough. By 2004, its executives stood accused of sugarcoating the books.
A half-dozen of these executives were removed like burned bits from a fryer. Settlements with regulators and class-action lawyers followed.
So, over the past 4 1/2 years, Krispy Kreme has rolled through four CEOs, all trying to get the company out of its hole. The most recent is Jim Morgan, who is pitching soft- serve as the solution.
After more than 80 years in business, Krispy Kreme has learned that a lot of people buy doughnuts only in the morning. Oh, and fewer buy them in the summer. So they’re going to sell something resembling ice cream too.
Krispy Kreme’s profits were down 53 percent in the quarter ended May 3. But it was a good quarter, considering the recession and Krispy Kreme’s challenges, ending with a $1.9 million profit and a 2.1 percent increase in company-owned same-store sales.
Besides soft-serve, Morgan hopes to add bagels, muffins, rolls and pastries. Fortunately, the costs of flour, sugar, shortening and gasoline are lower than they were last summer.
Krispy Kreme stock has bounced back from $1, but only to about $3.50 a share. For that, you can more safely invest in a half-dozen doughnuts.
As an overpromised, underdelivered IPO from 2000, it’s lucky to be still servicing its debt load amid the latest round of economic implosions. But the doughnut maker is clearly stuck — kind of like that grease wad in the sewer pipe.
Al Lewis: 201-938-5266 or al.lewis@ ; read Al’s blog at .
