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Features

Doughnut celebrates a decade in India, but how glazed is the future?

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Doughnut was a Hollywood dessert for most Indians. They devoured it on screen — with a coffee to go — until Mad Over Donuts launched its first store in Noida in March 2008.

“Some thought it was a sweet version of the vada,” recalls an amused Tarak Bhattacharya, chief operating officer of the Singapore-based doughnut brand, about the initial, tentative reaction of customers.

“Though some had tried a lookalike product in a neighbourhood bakery, exposure to authentic doughnut was missing.” Back then, the product was unfamiliar, the market was niche and business prospects were uncertain.

Ten years down the line, people are waiting at doughnut outlets in metros for the warm confection to tumble into trays. But is the future of the three big doughnut brands in the country — Mad Over Donuts, Dunkin’ Donuts and Krispy Kreme — as glazed as a sugar-coated roundel?

“Doughnuts are at an inflection point now,” says Bhattacharya. Mad Over Donuts, which is going to celebrate 10 years in India, runs 55 stores across Mumbai, Bengaluru, Delhi and Pune, and will soon foray into Middle East and Southeast Asia.

Bhattacharya says a strong foundation has been laid for doughnuts in the country. “Just look at the Philippines and Japan with 2,000 and 1,500 stores, respectively. The market is set to take off in India. The opportunity is massive.”

Taste of a Doughnut
For American doughnut brand Krispy Kreme, which opened in India in January 2013, the journey has been about familiarising the product to consumers. “Product familiarity is the key,” says Vishal Kapur, president of Citymax Hotels (India), an arm of the Dubai-based Landmark Group, which runs Krispy Kreme outlets in India.

Whenever Krispy Kreme opens a new store, it invests in a grand launch, followed by promotions and sends out samples in the neighbourhood via a doughnut drop activity.

“We also have programmes where children tour our facilities and get to decorate their doughnuts,” says Kapur. Krispy Kreme has 24 stores across Delhi, Mumbai, Chennai and Bengaluru, and plans to open 11 more.

“Educating customers about the features and quality of our product is a continuous exercise,” he says. Agrees KA Madappa, vice-president and business head of Krispy Kreme. “The more the sampling, the better are the chances of customers getting hooked onto the product,” he says. Though the uptick has been great, the brand has to grow cautiously and remain alert to how Indians see doughnuts, adds Madappa.

“Unlike pizza, doughnuts are not seen as a meal option. It’s an all-day snack,” he says. While in the US, doughnuts are still a breakfast item and a to-go option, in India it has never been the case, which made it challenging for the brands to expand their reach.

They went for out-of-the-box ideas. Mad Over Donuts, for instance, had hundreds of trials with top chefs from Asia before arriving at its proprietary eggless recipe for doughnuts.

“Going eggless has paid massive dividend through the years,” says Bhattacharya. With constant innovations, including savoury flavours like Spice Surprise (chilli, cheese and spicy salsa) and Mmama Mia (cheese and herb) and flavour festivals at least once in two months, Mad Over Donuts stepped on the gas to expand the market. It even let in the consumers see how doughnuts were freshly made at stores.

While maintaining the focus on doughnuts — sweet as well as savoury — Mad Over Donuts also rolled out waffles, cupcakes and eclairs. The logic was simple: the biggest player in the segment had to drive consumption.

“It was simply the love-at-firstbite experience that helped the brand grow in India,” says Bhattacharya, adding that it takes time to develop a taste. “But one does not need an acquired palate to enjoy something fresh, soft and sweet,” he says, claiming that the revival of QSR segment in the last few quarters in India means a fresh impetus for the category.

A booming millennial population, say marketing experts, helped doughnut brands in India.

“This segment easily got connected with the American dessert,” says Ashita Aggarwal, head of marketing, SP Jain Institute of Management and Research. While positioning a box of doughnuts as a gift made it more acceptable to people, top players are also rethinking their retail strategy by shifting to smaller store format.

Smaller stores, says Aggarwal, not only cut operational cost but also make it feasible to penetrate deeper into smaller towns and cities where headroom for growth remains massive.

“One needs to remember that Domino’s became big only when it expanded into smaller towns,” she says. “But doughnuts are not pizzas,” adds Aggarwal, referring to the reckless expansion of Dunkin’ Donuts in the country, which backfired for Jubilant Jubilant FoodWorks that has the master franchisee rights to the American brand in India and opened the first store in 2012.

From 73 outlets across 23 cities and towns during the third quarter of fiscal 2017, Dunkin has cut its presence to 44 stores in 12 cities and towns during the third quarter of this fiscal.

Indulgence of Sorts
During a recent conference call, Hari Bhartia, co-chairman of Jubilant FoodWorks, presented a candid picture. “Dunkin’ Donuts has made significant progress and we have considerably reduced the losses,” he reportedly said, adding that the closure of unprofitable stores as well as an emphasis on beverages and donuts helped control costs and drive efficiencies.

Pratik Pota, chief executive officer of Jubilant Food-Works, said as much in a recent interview to ET Magazine, “Bringing back focus on doughnuts has brought back growth for Dunkin’.” Dunkin’, which was betting big on burgers, not only went back to its core offerings to drive growth, it also cut the store size: from 800-1,200 sq ft to 300-700 sq ft.

“Burgerisation of Dunkin’ was a bad strategy,” says brand strategist Harish Bijoor, referring to the company pushing burgers instead of doughnuts. “When you have ‘donut’ in your name and in your DNA, you don’t fool around,” he says.

Krispy Kreme probably gained the most by going slow and steady. “Cautious expansion is the key,” says Madappa. Krispy Kreme, he adds, did not Indianise its products but experimented with local flavours as doughnuts largely remained an indulgence. “It will take some time before the product becomes a part of daily life in India,” he says, before adding that growth potential remains huge.

Bijoor adds a word of caution for the doughnut players: pushing doughnuts and-coffee culture in a country where idli with coffee and a bun with tea rule the market might not be easy.

Bhattacharya of Mad Over Donuts, however, is convinced that a decade in India can’t be an aberration. “Doughnuts are here to stay and grow.”

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