By Stephanie Wong
Dunkin’ Brands Inc., owner of the Dunkin’ Donuts chain, will reduce the sugar in its pastries to adapt to tastes in China after returning to the world’s most populous nation.

“We’ve done a lot of testing and research, and we try to adapt that research into the product line, into the topping, into the type of donuts,” Anthony Pavese, chief operating officer of Dunkin’ Donuts’ international operations, said in an interview today in Shanghai.

The company opened its first Chinese store in Shanghai today after exiting eight years ago, with a partner at the time saying there wasn’t a market for doughnuts in the country. While Dunkin’ Donuts returns amid slowing economic growth, China’s retail sales rose 22 percent last month, close to the fastest pace in nine years.

“If they are going to be successful in China, they will have to make sure their food is not too sweet because Chinese don’t like sweet doughnuts,” Shaun Rein, managing director of China Market Research Group, said in an interview today. “Mister Donut has done pretty well in China and one of their best selling products are curry doughnuts.”

Osaka, Japan-based Duskin Co. owns the Mister Donut brand in Asia and operates more than 1,100 stores in Japan.

Dunkin’ Donuts, then a unit of Allied Domecq Plc, closed all its seven branches in China in 2000. An executive with Allied Domecq’s local partner at the time said the Chinese didn’t like the doughnuts.

‘Better Prepared’

China Market Research has done “a lot of research on Chinese taste for doughnuts, why they like certain doughnuts and we found that Chinese don’t like Krispy Kreme or Dunkin’ Donuts, because they are too sweet,” Rein said. “If Dunkin’ Donuts localizes, they may have a good shot.”

The Hong Kong franchisee of Krispy Kreme Doughnuts, Inc. entered liquidation last month, two years after entering the city. One of the franchisee’s “difficulties” was high rent, according to Stephen Briscoe, managing director of liquidator Briscoe & Wong. Krispy Kreme is the second-largest U.S. doughnut chain, trailing Dunkin’ Donuts.

Dunkin’ Donuts is “much better prepared coming to the market today,” Pavese said. “We’ve learned adaptation to the consumers, to listen to the consumers and see what makes consumers tick.”

While the snack-food chain will continue to offer its traditional menu, including sandwiches and coffee, it has localized its offerings with green tea donuts and mochi rings.

Dunkin’ Brands, based in Canton, Massachusetts, said it has signed franchise rights to local partners, which will open 250 outlets in Taiwan, Shanghai and the southern Chinese province of Guangdong in the next decade.

The chain has more than 1,800 stores in Asia, Pavese said. Dunkin’ Donuts had $5.3 billion sales last year, according to the company’s Web site. Dunkin’ Brands, which includes Baskin Robbins, had $6.6 billion sales.

Dunkin’ Donuts was acquired by private equity companies Bain Capital LLC, Carlyle Group and Thomas H. Lee Partners LP in 2006.