In 2d crack at China market, Dunkin' Donuts alters recipe

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The sweet potato doughnuts are a dead giveaway: This is no ordinary Dunkin' Donuts.

And it was no ordinary store opening in Shanghai yesterday for the Massachusetts chain. Dancers in lion costumes exorcised evil spirits and summoned luck and fortune. Hundreds of customers lined up for their first chance at Dunkin's offerings at the new shop, a two-story venue with couches and cushy chairs.

The new store heralds the chain's return to China after giving up on the market a decade ago. Foreign companies have long coveted the opportunity to sell products to the world's most populous country, but not everyone has succeeded. Trying to cater to 1.3 billion consumers can be daunting, and bureaucratic hurdles there only make it harder.

When Dunkin' opened its first store there in 1994, the doughnut chain struggled. Its treats were too sweet; it underestimated the challenge of converting a nation of tea drinkers to coffee; and, inexplicably, Dunkin' chose as a local partner an aerospace firm that had no experience running restaurants. By the late 1990s, Dunkin' had retreated.

Now Dunkin' is back because China is simply too big to ignore. The company plans to open 100 stores in Shanghai over the next 10 years, another 50 stores in the Guangdong region to the south, and potentially thousands more across the country. Dunkin', in the midst of a nationwide expansion in America, has 6,143 US stores and nearly 2,400 international shops, earning about $5.3 billion in sales worldwide last year.

"The single biggest potential we have outside the US is China," Tony Pavese, chief operations officer for Dunkin' international, said in a phone interview from Shanghai, where he helped cut the ribbon at the new store. "It's a milestone."

Retail analysts say companies have labored for years to understand how to make it in this irresistible but incredibly complex marketplace. Whirlpool Corp. is on its third attempt after losing millions on two failed joint ventures in China to sell its dishwashers, refrigerators, and washing machines.

After spending millions to establish a presence in China, online auction house eBay Inc. shut its main website in China and tried again with a joint venture with a local Internet company. Kraft Foods Inc. had to remake its iconic Oreo into a chocolate-covered wafer cookie in order to appeal to Chinese consumers.

"There is a saying that in China, 'everything is possible, and nothing is easy,' " said Dennis Lombardi, executive vice president of food service strategies for WD Partners, a development firm.

Dunkin's failure when it first entered China has made executives particularly sensitive about getting it right this time. First, it found a local partner - Mercuries & Associates - that operates numerous shopping centers and restaurants throughout Asia, and knows the ins and outs of getting permits and passing inspections.