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Cruller Fates : Cambodians Find Slim Profit in Doughnuts

CALIFORNIA & CO. / DANIEL AKST

March 09, 1993|DANIEL AKST

The Tao of doughnuts came to California from Cambodia, of all places. At night, the Tao of doughnuts is baking. By day the Tao is in Santa Ana. But most of all, I suspect, the Tao of doughnuts is exhausted.

Who can blame him? Bun H. Tao, a giant of the California doughnut business, must struggle night and day to reverse the declining fortunes of an industry on whose fate his own wealth rides. It's like pushing a giant cruller uphill.

The doughnut business in California, in case you hadn't noticed, did two things during the 1980s. First, it came to be dominated by Cambodian immigrants, of whom there are more than 70,000 in this state. Second, it exploded; new stores opened all over California.

Like so much that flourished during those intoxicating years, doughnuts today are in decline. Southern California's doughnut market is especially saturated, and despite the loss of 40 or 50 stores in last year's riots, competition has kept a lid on prices. People are also having second thoughts about scarfing down a dozen fat-fried, calorie-laden treats.

Worse yet, the Southern California economy is awful, and contrary to the impression our pastry-glutted mini-malls convey, doughnuts aren't the staff of life. A big part of the business is selling coffee and a doughnut to people on the way to work, but lately, too many don't have work, so they aren't buying.

Drive around Hollywood and you'll bump into one doughnut shop after another, most of them owned by Cambodian immigrants and filled with unsold jellies, cremes and so forth. From behind the counter at Windsor Donuts on Sunset Boulevard, Eny Ly says: "Too many people don't have jobs."

As a result, entrepreneurs such as Bun Tao are struggling. Tao's doughnut supply hH Distributors in Santa Ana, claims about $10 million in annual sales, almost all of it to Cambodian immigrants. But business is so bad that too many of his 1,400 customers can't pay for the equipment, doughnut mixes and other supplies they've bought. Struggling shops owe perhaps $700,000, and hard times have forced him to slash his mark-up.

"Things are very tough now," he says. "Every corner is doughnuts."

Tao has an awful lot tied up in all this. He gives instant credit, for example, and has loaned 300 coffee machines to stores that buy coffee from him. When doughnut-store owners lack the language skills or aggressiveness, he goes to bat with landlords who want higher rents.

His family is deep into doughnuts as well. Tao, who is 34 now, took over a Cypress doughnut shop owned by an aunt. "I personally make doughnuts there every morning at 3 a.m.," he says.

New immigrant groups often follow one another into a single visible industry or line of work. Chinese laundries and Greek diners were paths to wider success for earlier arrivals. In Los Angeles today, get into a taxi and the driver is likely to be a Russian immigrant. In California, for Cambodians, it's doughnuts.

With ready credit available from B & H, Cambodian families could get into business without much more than an appetite for hard work. Husbands typically bake all night, while wives and teen-age children work the counter by day. Many are open round the clock.

What was originally a phenomenon of Southern California soon spread north. Tao's childhood friend, Robert Chau, who miraculously survived four years in a Khmer Rouge "re-education" camp and a hair-raising escape through Thailand, now owns B & H Distributors in Hayward, which handles abut 600 accounts in Northern California.

Business seems better there. Chau's situation room has more than a dozen maps festooned with little flags representing customers, and Chau says he hopes to expand into Fresno.

Ultimately, the man responsible for all this is Ted Ngoy, a California doughnut visionary almost on a par with Verne Winchell. A Cambodian of Chinese heritage (like Tao and Chau), Ngoy was ambassador to Thailand under the Cambodian government of Lon Nol, so he was lucky enough to be out of the country when Pol Pot and his followers began the wholesale slaughter of their own people.

Under the circumstances, Ngoy decided not to go home. Instead, he brought his nephew, Bun Tao, to California and went to work as manager of a Winchell's doughnut outlet in Newport Beach.

In 1977, Ngoy got his own shop in La Habra, in which he set the pattern for the many Cambodians who would follow him into the business. The store was a family operation. Tao, in fact, baked doughnuts there every day. A year later he opened a place of his own. The Cambodian doughnut explosion had begun.

Consider that, back in 1977, Ngoy was the first Cambodian immigrant to own a doughnut shop. They didn't even have doughnuts in Cambodia, after all. Now consider that today, B & H north and south, the main suppliers to California's Cambodian doughnut stores, have perhaps 2,000 customers between them. That's probably two-thirds of the doughnut shops in the state.

Inevitably, a question arises: What are the natural limits to the doughnut market in California? In other words, how many doughnuts can Californians eat?

California's biggest doughnut chain, Santa Ana-based Winchell's, has already had to retrench. Mel Allison, Winchell's director of special projects and a 33-year veteran of the business, says the chain now has about 200 California stores, down from perhaps twice as many in just seven or eight years.

He says competition comes not just from immigrants, but from chains such as McDonald's, Burger King and 7-Eleven, which have gone into the breakfast business as well.

No doubt all of this was bad for Ngoy (who lives in Mission Viejo but couldn't be reached for comment). According to Bun Tao, his uncle owned 50 California doughnut shops at one point, before a series of reversals set in.

Now, says Tao, Ngoy is out of doughnuts. His nephew, meanwhile, struggles on. But the Tao of doughnuts sounds awfully tired.

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