It’s the latest food craze sweeping the country and it is churning out extra sweet profits for companies. Satisfying any-time cravings, companies are discovering that the humble donut is hitting all the right notes.
American company Krispy Kreme, which flagged off its India plans barely a week after US rival Dunkin' Donuts set up shop in the country in May 2012, set the stage for a donut onslaught.
In a run-up to the launch, customers were treated to a sampling fest at some places across Bangalore in January, where packs of six or 12 donuts were distributed free of cost. The year thus began on a sweet note for donut lovers!
Not to be left behind, American breakfast chain Dunkin’ Donuts decided to go the whole hog this March. To celebrate the inauguration of its first store in Delhi, the company gave away vouchers for free donuts valid year-long to all customers who visited its new Chandigarh restaurant on March 23.
While both claim that their donuts are more sophisticated concoctions than the garden-variety glazed or chocolate ones, Singapore-based Mad Over Donuts (MOD) has been giving these stalwarts a run for their money. Set up in 2008, MOD has enjoyed a monopoly for quite some time, more so since the donut chain has a presence in Mumbai.
Across the country, though, donut chains have been rising to the occasion. Swiss-based Donut Baker in Bangalore, and Mumbai-based SH Donut Empire lend credence to what New Delhi-based consultancy Technopak has been estimating. Revenue from cafes in India is likely to jump over 14 per cent annually over the next five years to about $410 million. Clearly, cupcakes and macaroons are passé.
With pricing lower in India as compared to the US, the UK, Singapore and Australia, the donut empire is teeming with goodies. Krispy Kreme Donuts, which operates around 700 stores worldwide, teamed up with Citymax Hotels India, the hospitality division of the Dubai-based retail giant Landmark Group. The aim, to develop and deliver 80 Krispy Kreme stores in South and West India over the next five years, at an investment of over Rs 10 crore.
Dunkin' Donuts, on the other hand, partnered with fast food operator Jubilant Foodworks, which runs the Domino’s Pizza chain in the country. Ten months on, it has opened 10 stores at an investment of over Rs 12 crore, with plans to add over 90 stores in the next five years.
WHat's THE CHEMISTRY?
What exactly seems to be happening in donut domain, with rivals circling each other? The fried, ring-shaped snack, often glazed with sugar or filled with cream, has got marketers fighting for shelf space and consumers’ minds.
For Krispy Kreme, India provides an excellent opportunity for growth. Many Indian consumers are embracing internationally popular sweet treats, says Vishal Sawhney, President, Citymax Hospitality.
However, that has not stopped the firm from tweaking its foreign offering to suit Indian taste buds. Apart from presenting its most popular and freshly prepared recipes from across the world, including the Hot Original Glazed donuts, Citymax Hotels and Krispy Kreme are to work together to come up with local adaptations to suit the Indian palate as the brand reaches out to a wide consumer base.
Ditto for Dunkin’ Donuts. Dev Amritesh, President and COO, Dunkin’ Donuts India adds, “Though we have 24 varieties of donut, we decided to introduce new flavours given the taste of the Indian consumer.”
Thus, motichoor laddo donuts, kesar pista donuts and roasted coconut with gulab jamun donuts made an appearance at Dunkin' Donuts counters across Delhi NCR during Diwali. Customers in Chandigarh will get to taste some of the newbies that have been retained in its new store there.
As fast as the dough rises, so does expansion. While MOD plans to open 50 outlets across Chennai, Hyderabad, Ahmedabad and Chandigarh this fiscal, Donut Baker, owned by Global Franchise Architects that also owns Pizza Corner, and Mumbai-based SH Donut insist they will go beyond Bangalore and Mumbai, respectively.
Business owners are realising they can make some big dough making donuts. The arrival of Dunkin' Donuts and Krispy Kreme on the scene has also ensured that the category grows by leaps and bounds, all aided by their deep pockets and brand recall. Marketing blitzkriegs are adding to the fun element.
the power of free
On January 19, 2013, the launch date for Krispy Kreme, the first customer was awarded a year’s supply of doughnuts - 53 dozen boxes, one per week. The second person in line bagged six months’ supply at 26 dozen boxes. The third person in line got a three-month supply of 13 dozen boxes, while the fourth to the 100th person in line got a one-month supply, at five-dozen boxes. It didn't stop there - the 101st to the 200th person in line got a dozen donuts free.
Then Dunkin' Donuts (DD) decided to rise to the occasion. On March 23, the day of its Chandigarh store launch, the company gave away vouchers valid year-long for free donuts to all customers who came to the restaurant.
“It is not just an exciting idea. We immediately got a huge number of people eager to try the product. It is something that has not been experienced before. Though Chandigarh boasts a couple of bakeries, local donut outlets and 5-star hotels, our arrival freebie immediately changes the scale of entry. It becomes a conversational point,'” says DD's Amritesh. The company's idea of a buzz, something that the COO insists “is needed for the launch and provides a huge sampling opportunity”, has gone viral, with scores of customers SMSing their friends about the year-long free donuts.
“We look forward to this whole group of friends walking in with this booklet year round and indulging in our other wares. It is also a frequency-building initiative,” adds the DD COO.
The move will also help the company climb the social ladder. Though free donuts could be driving the sampling craze, social media users have been added to the mix. A new report has emphasised that their number in urban India reached 62 million by December 2012, and is forecast to reach 66 million by June 2013.
The report by the Internet and Mobile Association of India and market research firm IMRB notes that 34 per cent of users are from the top eight metros while 35 per cent are from small towns of population up to five lakh. For most donut majors, metros will be the first port of call.
Single-day promotions, like the ones offered by Krispy Kreme and Dunkin' Donuts are intended to put people in a good mood - to remind them to get their free donut, enjoy the other eatables as well as the ambience at the store. The brand scores high on brand awareness, and could remain top of mind for most consumers, well after the initial hoopla.
As DD's Amritesh points out, “Donut is a product that can align with a social calendar very well. It is like a T-shirt, one can paint on it with various mediums.” DD's Christmas cake donut, or the Holi donut, “a springy, smiley, yellow sunny donut”, or even the Valentine's Day two-heart shaped donuts, appropriately called ‘Angels Kiss’ and ‘Devils Bite’, have apparently done the trick.
“One of our learnings has been that donuts can get aligned to whatever is happening around and can be teamed up with every conversation. Though the donut's role in the US is largely at breakfast, we are focusing on anytime indulgence here,” adds DD's COO.
The growing popularity of coffee, donut's mate, has not gone unnoticed. For most donut firms, that is another story altogether, brewing fresh at a counter near you. Watch out, waistlines!