Going beyond your average doughnut


August 29, 2017

Written By Chandni Mathur

Still in their infancy in the growing QSR segment, doughnut chains in India are looking to offer an expansive product range to operate feasibly

Still in their infancy in the growing QSR segment, doughnut chains in India are looking to offer an expansive product range to operate feasibly

Fancy consuming a cinnamon-sprinkled doughnut and coffee for breakfast? Not quite? While doughnuts are a part of daily consumption in mature markets like the US, India is still opening up to this new dough-filled world. Although consumption is gradually increasing with the young generation willing to experiment, the doughnut segment is still in its infancy in the country.

As per a market research report by Technavio, the global doughnut market is expected to grow at a CAGR of over 5% from 2017-2021 due to an ‘increasing number of retail stores, rising urbanisation and changing lifestyles of consumers’. The APAC market in particular is expected to fall in line with global growth.

Major players like Dunkin’ Donuts, Mad Over Donuts (MOD) and Krispy Kreme have penetrated the Indian market by launching several stores, but the frequency of consumption is still far from desired numbers. Players in the space have identified the need to serve doughnuts in sweet and savoury options. Even within sweets, doughnut chains are attempting to position the product in the same bucket as traditional Indian sweets and build it up as a gifting option for special occasions.

Tarak Bhattacharya, COO, Mad Over Donuts says, “Over the years, people have started turning to doughnuts as a perfect gifting option — an alternate to the common confectionery at celebrations, a go-to place for sweet cravings, a snack at corporate gatherings or simply for enjoying tastefully handcrafted gourmet doughnuts.” Recent marketing campaigns by Dunkin’ Donuts India for Raksha Bandhan positioned the sweet treat in competition with traditional sweets by launching doughnut flavours like motichoor laddoo, kesar badaam and saffron cream to not just increase consumption but also build habit by pricing doughnuts for as less as Rs 39.

“The challenge is to get masses onto the category,” mentions Tarun Bhasin, president and chief business officer, Dunkin’ Donuts India. “We see a huge jump in sales during occasions. On occasions like Valentine’s Day and Friendship Day, we have seen an increase in sales of 70-80% from the base on weekdays.”

Interestingly, marketing strategies of doughnut chains have been limited to innovations within the product itself or within the store. Brands thrive on the outcome of pull marketing rather than push marketing. For example, MOD has never advertised to sell its products, and marketed itself as India’s Most Loved Donut Brand which makes people fall in Love at First Bite. But the chain conducts BTL events like Orange Tee which gives away free supply of doughnuts for a month, National Donut Day where doughnuts are offered at a special price and observance days like Women’s Day where a discount is given equivalent to the age of the woman.

Devangshu Dutta, chief executive at Third Eyesight states, “Doughnut is still fairly new to India. Thus, the presence and accessibility is limited to markets where consumers have consumed them or are well-travelled.”

Scalability is the crux of any QSR business. Being a modern consumption product, the retail presence of doughnut chains is limited to metros/big cities, where the cost of real estate is an added challenge. In order to cut costs and attain profitability, Dunkin’ Donuts recently exited a few cities and chose to concentrate more on metros. It currently has 55 stores in 15 cities.

Currently with 50 stores in Mumbai, Pune, Bengaluru and Delhi NCR, MOD aims to have 250-300 stores in a span of five years. Moreover, the flexibility of its store format allows the brand to operate in 80 sq ft kiosks up to 800 sq ft cafés.

K A Madappa, VP and business head, Citymax Hotels, which runs Krispy Kreme Doughnuts in India informs, “High street doesn’t make sense in terms of the rental component. We are now focussing on introducing products in high traffic locations like airports and metro stations.” Although the inflection point in the doughnut segment is yet to come, players are already identifying the need to offer more than just the flavoured treat to run profitably. And that is the philosophy Dunkin’ Donuts seems to be following. The brand, which was originally Dunkin’ Donuts, now operates outlets in India under the name Dunkin’ Donuts & More. While having more items such as coffee and burgers makes the model more viable, if one has ‘doughnuts’ in its name, that has to be the key proposition. But Dunkin’ wants to be known for more. Its recent launch of the Rs 89 combo (doughnut and coffee), has seen coffee sales increase by 30-40%. It aims to reduce losses by 50% and break-even by the next financial year.

Similarly, Krispy Kreme has included variety in its menu, from beverages to milkshakes to complement the sweetness of the doughnut. Madappa adds that Krispy Kreme has always been a doughnut and coffee player, but made lateral introductions like milkshakes and saw positive traction for these. This is to ensure customers don’t give it a skip as only a dessert or an occasional snack option. MOD has similar plans in the pipeline to expand its product range beyond doughnuts.

Source: financialexpress