Filling The Hole
Think Trans Fats Are Scary? Try Fixing This Doughnut-Nut Maker.
By Ellen McGirt FORTUNE senior writer

(FORTUNE Magazine) - There's something to admire about a man who's managed to convince millions of health-conscious Americans that cookies and crackers are wholesome snacks. Daryl Brewster, until recently president of Kraft's $6 billion North American cereal and snack business, fits that profile. And he certainly isn't afraid of a little controversy--or creative marketing in the form of a Snack Fairy bearing "100-calorie packs." But most of all, the 23-year food industry veteran is a canny corporate operator. "I guess survival is one of the things that I've accomplished," laughs Brewster.

His survival skills are about to be tested: On March 7 he was tapped to be the new president and CEO of Krispy Kreme Doughnuts (Research). Think trans fats are a worry? Once the darling of Wall Street, shares of Krispy Kreme fell from a high of nearly $50 in 2003 to a low of $4 last fall. (They're now about $8.50.) Worse, the sweet smell of doughnuts has been replaced by a whiff of scandal--the SEC and the U.S. Attorney's office are investigating the company's accounting practices. Can Brewster restore KKD's sweet spot? "It's a good fit for the wholesale part of the business," says Morningstar analyst John Owens, "but there's going to be a steep learning curve when it comes to the retail and franchise operations." To help, former CEO and turnaround pro Stephen Cooper is sticking around for the time being as "chief restructuring officer."

Brewster's first challenge will be winning a game of beat the clock: The company has until April 30 to provide restated financials and file its annual report for 2005 or face NYSE delisting procedures. (It hasn't filed any annual or quarterly reports since 2004.) Krispy Kreme is expecting a decline in revenue of 24% and has warned investors not to rely on past numbers. Hitting the ground number-crunching, Brewster spent his seventh day as CEO meeting with auditors and accountants. "We're on track," says Brewster. "When we're finished, we'll have the cleanest set of books in America." Top of page

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