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Krispy Kreme turns to unlikely help

Amid an accounting scandal and falling sales, the doughnutmaker appoints two ex-tobacco executives to help it overcome its problems.

By ASSOCIATED PRESS
Published November 2, 2006

CHARLOTTE, N.C. - Nearly two years after its stock collapsed amid an accounting fiasco, Krispy Kreme Doughnuts Inc. faces a host of lawsuits, a criminal investigation and declining sales. Meanwhile, efforts are under way in New York and Chicago to ban a key ingredient of its famous doughnuts, one that helps make the trademark treats so darn addictive.

Sounds like the challenges faced by executives at Big Tobacco, and that's just where Krispy Kreme has turned to for help.

This fall, Krispy Kreme named Charles Blixt, a former executive vice president and general counsel at Reynolds American Inc., as its general counsel. A week later, the company appointed Andrew Schindler, the retired chairman of Reynolds American, to its board.

"They have long and distinguished careers at (Reynolds) and they left in pretty good shape. It's not a huge transition for them," said Mike Lord, a professor of corporate strategy at Wake Forest University. "Importantly, what's key is that they do have a great wealth of experience to manage under adversity."

Adversity is what Krispy Kreme faces, and not only on the balance sheet.

Amid hoopla that included lines around the block whenever Krispy Kreme opened a new store, the company expanded too quickly. Shares that once traded above $50 crashed, dropping below $4 late last year. The company has spent nearly two years trying to straighten out its accounting while it works with prosecutors and regulators investigating an apparent attempt by former executives to hide losses.

The latest threat is less imminent, but potentially more devastating. In New York and Chicago, public health officials want to ban the use of artificial trans fatty acids, found in some shortenings, margarine and frying oils - ingredients in everything from pie crusts to french fries to, yes, Krispy Kreme's famous glazed doughnuts.

The company isn't willing to say if there's a direct connection between the push to ban artificial trans fatty acids and Krispy Kreme's decision to hire a pair of former tobacco executives. Blixt was retained to help address critical legal issues, while Schindler was added for his international insights and strong operational and turnaround know-how, the company said in a statement.

"These guys were successful in the tobacco industry fighting all the public health people, and here we have another industry with similar challenges," said Paul Bloom, a senior research scholar at Duke University's Fuqua School of Business.

Who are they

Andrew J. Schindler

- Age: 62. Born Aug. 12, 1944

- Home: Winston-Salem, N.C.

- Education: Bachelor's degree from Franklin & Marshall College, 1972. MBA, Wharton School, University of Pennsylvania, 1974

- Title: Director, Krispy Kreme Doughnuts Inc.

- Experience: Spent 30 years in various senior management positions at R.J. Reynolds Tobacco, including vice president of personnel, executive vice president of operations, chief operating officer and, ultimately, chairman and chief executive officer. He oversaw the 2004 merger of R.J. Reynolds Tobacco and the U.S. operations of Brown & Williamson that resulted in creation of Reynolds American Inc. before retiring in January 2005. In addition to Krispy Kreme's board, which he joined in September, Schindler serves on the board of directors of ArvinMeritor Inc., Pike Electric Co. and Hanesbrands Inc.

Charles A. (Chuck) Blixt

- Age: 55. Born Aug. 18, 1951

- Home: Bermuda Run, N.C.

- Education: Bachelor of arts and law degree from the University of Illinois, 1973, 1977

- Title: General counsel, Krispy Kreme Doughnuts Inc.

- Experience: A lawyer in private practice in Illinois and Michigan, Blixt held corporate legal positions at Caterpillar Tractor Co. and Fiat-Allis Construction Machinery before joining the R.J. Reynolds legal team in the mid 1980s. From 1995 to 2004, he was executive vice president and general counsel of R.J. Reynolds Tobacco, where he helped oversee a 2004 merger with Brown & Williamson Tobacco Corp.'s U.S. operations that led to the creation of Reynolds American Inc. After the merger, Blixt served as chief legal officer for Reynolds American before moving to Krispy Kreme in September.

[Last modified November 2, 2006, 00:01:37]