Doughnut marketing opportunities

Donuts distribution channels

A publication of the Department of Agriculture, Fisheries and Forestry entitled FoodMap: A comparative analysis of Australian food distribution channels (Spencer, S & Kneebone, M 2007) shows the food distribution channels in Australia in diagram form. 

Based on the FoodMap diagram, we highlighted which sub-channels are applicable to doughnuts distribution. The diagram, as we have adapted for doughnuts distribution, is shown below. (Grayed out text are subchannels that are not applicable to doughnuts.) 

 

Donuts are sold in Australia through the following channels:

Groceries: Major supermarkets sell doughnuts by packs of 6 or more. Bulk packages offers great value for money. The 2 major supermarkets, Woolworths and Coles, both make “house brand” donuts at their in-store bakeries. Some branded donuts are also sold side by side with the “house brand” donuts. 

Convenience stores: Convenience stores carry a few dozen fresh donuts which are delivered fresh to the stores everyday. These are sourced from wholesale donut bakeries. 

Included in this category are independent convenience stores, chain convenient stores and service stations convenience stores.  

Specialized: Most bakeries offer donuts in their product lines, which are made in-house. 

Takeaway: Independent takeaway shops offer donuts along with a selection of pastries  and quick snack such as pies, and coffee. Donuts are supplied by wholesale donut bakeries. 

Quick service restaurants (QSR): Donut chain stores belong in this category, and can be found in almost every shopping centre in Australia, mostly operating as kiosks. Donut King, Australia’s biggest doughnut franchise, based in Southport, Queensland, has the most number of outlets, with 320 outlets all over Australia. Krispy Kreme, based in Winston-Salem, North Carolina, has 54 franchise stores in Australia, with 6 factory stores, 4 hot shops, 24 fresh shops and 20 kiosks in operation. Dreamy Donuts opened in 2006 in Brisbane and now has 20 stores throughout Australia and New Zealand.  

Donut King

Dreamy Donuts

Krispy Kreme

Donut chain stores also operate in busy city locations and near major transport hubs, with formats from a small kiosk up to a quick service restaurant layout. 

Donut retail chains cook cake donuts in the premises using an automatic donut fryer and serve them fresh and hot with cinnamon and sugar. These donuts are also sometimes glazed or filled. Yeast donuts, on the other hand, are supplied by the chain’s central baking facility. In this facility, yeast donuts undergo initial cooking processes starting from mixing their proprietary premix, then proofing, sheeting and cutting, or extrusion and frying the donuts. The donuts are then quick frozen and delivered to retail outlets where these would be thawed, baked and then finished. Finishing may include glazing, icing, filling and toppings. 

Other QSRs, such as McDonalds, also offer donuts through their McCafe stores. 

Cafes/restaurants: Many cafes offer donuts in their product range. These donuts are either made in their in-house bakeries or supplied wholesale. 

Catering/institutions: Donuts supplied to catering or institutions such as workplaces are sourced from wholesale donut bakeries. 
 What are the current opportunities in this industry?

 

Doughnuts are well established as a “comfort food” and as a quick and economical treat, and food retailing remains strong in the market. The May 2010 report of Australian Bureau of Statistics for Retail Trade reveals that the following industries increased in trend terms: Food retailing (0.3%), and Cafes, restaurants and takeaway food services (0.2%).

 

A good location, with high visibility, high traffic area, like near train and bus stations, offices, or schools, a strategic business plan, creative product mix, and ability to identify and fill a “gap” in the market are some of the essential requirements in succeeding in this industry. While there are opportunities, acknowledge that there are also huge challenges in any start-up business and nurturing your own brand. Opportunities in selling competitively in major shopping centres is limited as many of the larger franchises are already established in this areas.

 

A possibility of being mobile will also increase market opportunities. Mobile shops can be carried on to local fairs, church fetes, festivals, or playgrounds.

 

Opportunities exist in operating a donut business through:

  1. supplying own bakery/restaurant: donuts as additional product line
  2. Retail: freestanding donut kiosk or food stall, specialty donut shop or a sit-down style doughnut shop that serves customers doughnuts, coffee and muffins
  3. Franchise: enter a franchising agreement with an existing branded business
  4. Wholesale: operate as a commercial doughnut bakery, wholesaler to convenience stores, grocery stores, mass merchants, food service and institutional accounts
  5. Industrial setup:  automated facility for high volume production

Why do people love donuts? 

 

At one of the franchised donut stores in a major shopping centre recently, we asked a family why they love donuts. Saxon, aged 7, declared, “We like donuts because they’re so yummm!” We asked him what was his favourite was among all the donuts, and he replied, “I like this and this,” pointing to the photos of yellow and green coloured iced donuts on the table. His mom agreed, “If I would let them, they would be here everyday. But, no, we only take them about once a week as a treat.” Saxon’s grandmother added, “I prefer the cinnamon ones, because they are warm and freshly cooked. I don’t mind the sweetness, I like it with my coffee and it complements it.” 

True enough, customers of this donut chain are families with young children and adults. But changing demographics seem to be affecting retailers as families continue to move to outer suburbs. The franchise owner of this outlet believes that the move of many of his regular shoppers to other suburbs have affected sales. 

But one thing remains, everyone loves a hot donut, and with coffee. “Always coffee with donuts. And the donuts should be hot. That’s why cinnamon donuts are the most popular”, the franchise owner said.

Advertisements