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No matter what part of the US a consumer goes to, there will be multiple retailers that sell donuts. The demand for the surgery treat has grown a great deal over the last several years. While many consumers still purchase their donuts at donut specific shops, the product has made its way into more and more places. Because of the higher demand, many grocery stores and convenience chains offer donuts to take advantage of the rise in popularity. In the past the donut was viewed more as a simple breakfast item, but with recent advertising it has started to be classified as more of a snack or as a dessert item.
(Rutherford, 2018) This has broadened the selling appeal of the donut to be eaten at any time besides just around breakfast.
While the popularity of donuts has risen in recent years there is no doubt that North America dominates the market with almost half of the worlds gross sales. (Rutherford, 2018) The revenue in 2016 reached as high as $40 billion and estimates show that it could reach around $55 billion by 2024.
This is partly due to the rising conditions of the economy in recent years. The industry as a whole took a considerable hit with the recession, but recently has made a large comeback with the improved economic status. As the economy has becoming more stable and the rate of the unemployment has decreased, consumers are more willing to spend on small luxury purchases. (PRWeb, 2014)
Snacking habits of the US show that more and more American are looking for convenience when it comes to their food.
(Patton, 2018) This is mostly due to the very busy lifestyle of the American consumer. More people search for premade meals and foods that can be eaten quickly on the go. With convenience at the forefront of American eating habits, the donut becomes a very viable option for the average consumer to reach for on a more frequent basis. This is reflected in many coffee chains in the US, as most of them have donut options as they are often eaten together. (Technavio, 2017) Currently the donut is not outselling more popular snack items, such as potato chips or beef jerky, but they have been proven to be popular among the sweet snacks. (Schoen, 2015) In 2014 it’s estimated that convenience stores sold 391 million donuts with sales reaching $580 million showcasing their immense popularity. (Schoen, 2015)
Globally the increase of donut sales has occurred in large part by urbanization. (Technavio, 2017) As more and more locations become urban areas the number of retailers has drastically increased. Among the arrival of new retailers for the ever-expanding population, are the food chains and convenience stores that supply the in-demand donuts. The new growth around the world has opened up many opportunities to introduce more donuts into the global market. Major vendors have put a lot of their focus on the various tastes of the specific regions they serve. (Technavio, 2017) The growth in Europe has be steadily growing, but the Middle East and Africa is where a large amount of growth is predicted to occur. Years of development have created a lot of tourism in those regions, building the population. The increased population of these regions has been seeing a major shift in eating habits which has great potential for the donut market.
Another factor that contributes to the rising success of the donut is the many varieties of donuts that can be purchased. Initially the donut was traditionally made from yeast-based dough, and they still prove to be popular as they make up 65% of the global market sales. (Rutherford, 2018) However, in the 1830’s the cake-based donut was introduced, and has grown in popularity over the years. (Rutherford, 2018) In contrast to the softer lighter yeast donuts, the cake donuts made from sweetened batter and tend to be crispier. As the demand for donuts has risen so has the needs for variety to keep up with the customer’s changing tastes. On one side there is the customer’s desire to have donuts made with fresh ingredients, but there is also the desire to have options of fun flavors to keep the dessert interesting. Many donut companies do their best to keep things fresh but also try to make sure that the shelf life of the treat is as long as it can be. For instance, the shelf life of yeast donuts is only around 12 hours, so they would need to be purchased and consumed as quickly as possible. Cake donuts, being denser, can have a longer shelf life but may not sell as much compared to the more popular yeast variety. (Rutherford, 2018)
More and more customers have been seeking healthier options when snacking and the donut industry has tried its best to offer options to comply with this demand. Many bakeries have had to be creative to make changes while not sacrificing the taste. Many ingredients in the past have been labeled as unhealthy in the public eye causing massive recipe changes. The FDA has even been involved in removing certain types of oil from baked goods. (Rutherford, 2018) In addition, for healthier donuts there has been a great movement of new and exciting flavors for customers to try. A new gourmet craze has promoted bakers to try and come up with new flavors to build customer interest. For example, the cronut created a huge demand in 2013 and now many donuts shops have their own version to keep up with the popular demand. (Rockwood, 2020)
As the donut has proven to be a popular and ever-growing market it would make sense to want to invest into the business. The larger donut chains of Dunkin’ Brands and Krispy Kreme are some of the most recognizable brands associated with donuts. While they are considered a donut chain, Dunkin has solidified themselves as being in the coffee business. The industry as a whole has had 50% of the chain sales being other products besides donuts. (PRWeb, 2014) Dunkin has taken advantage of the popularity of coffee sales to entice customers in, and while they are there making the donut available for purchase. Krispy Kreme, famous for their having donuts fresh off the assembly line, prides themselves on focusing on the donuts themselves while providing other products to compliment the consumption of the donut. As both brands are popular options in the industry to acquire, it is important to see which brand’s business model is more successful. In this analysis we will decided, based on financial findings, if Dunkin or Krispy Kreme is the best company to go with.
Dunkin’ Donuts (DD) opened in 1950 in Quincy, Massachusetts. All of Dunkin’ Donuts locations are franchisee owned and operated. But not only do they have the stand-alone shops, they also are within some gas stations, airports, malls and supermarkets. “DD has over 8,400 locations across the United States, in 41 states with 52 varieties of donuts. In its 67 years of operation, it has opened over 12,000 stores in 45 countries.” (OLENSKI 2017) As of now, most of their locations are on the East side, but they are gradually opening their market to new locations westward. Dunkin’ Donuts plans to expand its number of American locations to 15,000 by 2020.
Dunkin’ Donuts changed its name to just Dunkin’ in January 2019. The company is now wanting to focus more on coffee sales then donuts. The name change came with a wave of others, companies now are diverting from being so specific toward being vaguer, hoping this would open their market. Since the name change, sales have increased for Dunkin. Along with Starbucks, they are the two largest eatery chains that specialize in coffee in the United States. Dunkin’ is seen to be more competitive with their pricing, they aimed for more of the middle class. They aim at being the lowest cost provider while still maintaining good quality of products.
There are 355 Krispy Kreme units in 39 states in the U.S. “They have 650 locations outside the United States, in 23 other countries, with at least 44 variations.” (HISTORY) KK was founded in 1937 in Winston- Salem, North Carolina. Their donuts started being sold to local grocery stores in the southeast before expansion. Krispy Kreme plans to open 45 new locations across the U.S. through 2020.
One of KK’s major focuses is on their expansion of new locations with their new feature products. New stores will feature milkshakes and ice cream sandwiches using their donuts and customers will now have the opportunity to build their own custom donuts right in front of their eyes. Krispy Kreme wanted to stay in the dessert business instead of developing other breakfast offerings; so, ice cream was added to the menu. They will set out to digitize their menu boards and maximize on their “Hot Now” market, that will alert guests in shop or driving by that donuts are fresh on the line.
One of the main variations between the two shops is price. Krispy Kreme’s portion sizes are smaller which makes their nutritional value less. Their donuts are considered to be light and airy versus Dunkin’ Donuts are a lot thicker/ dense and they have much larger portion sizes. KK is more expensive as to Dunkin as well, only by a few cents although. Dunkin outsources their pasty production, sending donuts already baked and sometimes frozen to Dunkin shops. Whereas, Krispy Kreme bakes their donuts in house, and they are available hot and fresh right off the line. A KK store can produce up to 3,000 doughnuts per hour, and bigger stores can produce up to 12,000 doughnuts every 60 minutes.
The donut industry sales accounts for nearly 50% of the world’s gross donut sales; in terms of sales, North America leads. “Donuts generated $40 billion in revenue in 2016, a figure that is projected to rise to approximately $55 billion by 2024.” (RUTHERFORD 2018) Donuts are now not only seen as a breakfast item, they are now being labeled as desserts and snacks as well. Now that packaged donuts from bakery’s etc. are now being sold in supermarkets, gas stations and convenience stores, they are gaining popularity quickly. “U.S. sales reported that retail sales of donuts from stores reached $1.97 billion for the year of 2016. A 3.4% increase from the previous year.” (RUTHERFORD 2018) The donut business is booming with no forecast of letting up anytime soon.
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