Lesson in Economics – Black Market Krispy Kreme Donuts

Is it a matter of the law of supply and demand or are Bangkok residents just too impatient to queue up for an hour to get donuts?  One thing is for certain: ever since Thailand’s first branch of Krispy Kreme, the popular North Carolina-based donut chain indulged in by former President Bill Clinton, opened last September there has been a black market for donuts in Siam Square.

The franchise is majority owned by Ausanee Mahagitsiri, the daughter of a wealthy family who owns one of Thailand’s largest conglomerates.  With the first location at Siam Paragon, one of the largest and busiest malls in the city, Khun Ausanee expects to build 20 locations in the country over the next few years.

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Ever ready for a new trend, when the store first opened Bangkokians eagerly queued for hours to buy a few dozen of the donuts.  These days, the lines are shorter, although there are still limits placed on how many donuts you can purchase.  Also, if you want the specialty donuts (frosted, filled, sprinkles, etc.) you can only order a mixed dozen.  No picking and choosing allowed.

To fill the demand, there are “donut scalpers” at work.  Not unlike their brethren outside a sold out Rolling Stones concert (or the men selling pornographic DVDs along Silom Road or, for that matter, the taxi touts at Suvarnabhumi Airport), the scalpers discreetly flash laminated picture menus and mutter their pitch – “Donuts, donuts for sale” – in barely audible tones.

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Can you spot the scalpers?  In addition to the woman holding the laminated card, the man behind her and the woman in the light blue shirt behind him were all working the crowd of shoppers, looking for an easy mark.  Security guards were present, too, although there seemed to be a loose understanding between all parties that so long as the scalpers were discreet, they could go about their business.  (Hey, that sounds like Silom Road and the airport, too!)

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Across the street from Siam Paragon, on the sidewalks of Siam Square just a few meters from a nearby Dunkin’ Donuts shop, vendors offer Krispy Kreme donuts for sale either by the dozen or individually, in entrepreneurial plastic containers that certainly did not come from Krispy Kreme.  On the day I investigaed, prices were marked up about 25%, relatively modest.  Presumably the mark-up has decreased over time, considering that the wait at the shop is now no longer than you might expect when checking in for an international flight. 

I have to wonder how long this fad will last.  Many people around Bangkok recall the Rotiboy craze.  Rotiboy, a Malaysian chain that makes coffee flavored Mexican buns, opened here in 2006, setting off a sensation for the fad-conscious locals that included hours-long lines.  Six month later the fad was dead, most of the locations closed, and only a few rebranded (“Mr. Bun”) branches remain, their employees looking forelorn as the fickle masses pass by.

Will this happen with Krispy Kreme?  Thailand doesn’t lack for donut chains – Dunkin’ Donuts and Mister Donut are both large and at least three other chains are growing here – and according to the Bangkok Post, donuts are a billion baht business.  ($33 million)

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On the whole, though, I suspect the craze will die.  Krispy Kreme donuts, which are really only special when you’re getting them freshly baked, aren’t yet available that way in Thailand.  To keep up with demand, thousands of donuts are made in advance, boxed, and stacked on rolling shelves in the back of the shop.  This is your guarantee that the donuts you see coming off the conveyer belt are not making it into the box about to be placed in your hands.

The bigger question that crosses my mind, though, is this: why are Thais so crazy for donuts?  I’ll take a freshly made khanom krug* any day of the week.

*More about those coming soon.