CHICAGO —Donuts: they’re not just for breakfast anymore. Consumers in search of a sweet treat are finding more reasons to indulge.
The donut market is poised to grow by $5.69 billion from 2020 to 2024, with a CAGR of 4%, according to Market Watch. Fortune Business Insights attributes growth in the North American donut market to a growing appetite for indulgence, a desire for foods that provide comfort and a rise in stress eating among consumers.
Despite this, donut sales growth is slowing down in center store. Dollar sales of center store donuts were $1.8 billion, an increase of $55.4 million versus a year ago. For the latest 52 weeks, dollar sales are up 3.3% YTD and up 10.2% compared to 2019. But unit sales are down 1.3% compared to 2020 and 1.6% compared to 2019.
As consumers venture back to browse and shop in-store, there’s been a rebound in perimeter donut sales. In the latest 52 weeks, dollar sales are up 11.1% compared to 2020, but the category has yet to achieve 2019 levels with dollar sales still down 9.7% from that time.
Dollar sales of perimeter donuts were slightly lower at $1.1 billion, a change of $106.3 million vs. 2020. But there is growth in perimeter single-serve donuts, with sales up 15.6% compared to last year and up 5.8% compared to two years ago. From a unit perspective, single serve still hasn’t caught up to sales from 2019 being down 16.6%.
This lag can in part be attributed to delays in reopening of the perimeter bakery, difficulty in staffing the department and a cautious return to the sale of self-serve single items. Many bakery departments have kept the category from stagnating by offering pre-boxed options in a variety of sizes that consumers can easily grab-and-go during the weekly shopping trip.
“Finding consistent, high-quality labor is expected to continue to challenge retail bakery/foodservice,” said Tim Grzebinski, client insights principal, dairy and bakery for IRI. “This focus will shift to a focused assortment and could create reductions in variety.”
Consumers looking to curb their shopping trips may rely on additional planning and lists, which could impact impulse purchases. Then again, they’re also making room on the list for a permissible indulgence. That can come in smaller and mini-sized offerings. This also provides planned indulgence while meeting a demand for convenient, on-the-go eating.
Donuts can meet that demand, but that means they must be kept on the shopping list. That starts with a shift in one’s outlook on daypart. Products such as donut holes make a perfect all-day snacking indulgence as evidenced by the increase in donut hole unit sales, up 2% compared to a year ago. Branching out beyond the traditional, new indulgent donut hole flavors include chocolate cake, cinnamon sugar cake, strawberry cake and seasonal standby pumpkin spice.
Consumers are looking to experiment with unique flavors (42%), seasonal flavors (36%) and single-serving sizes (33%) - Mintel
Mintel’s Prepared Cakes, Pies and Pastries US 2021 report found donut holes to be a perfect all-day indulgence with increased consumption happening as the day progresses. Twenty-four percent of those surveyed use sweet baked goods as a morning snack, 37% use donut holes as an afternoon snack and 41% indulge as an evening snack.
While many choose to focus on permissible indulgence, others are branching into health and wellness. Healthier ingredients with immunity-boosting properties are also enjoying their time in the spotlight such as spices and citrus that combine great taste and functional ingredients such as vitamin C, apple cider vinegar, dark chocolate, ginger, green tea and turmeric.
When looking to tempt consumers with delicious baked goods, Mintel’s Pastries report suggests consumers are looking to experiment with unique flavors (42%), seasonal flavors (36%) and single-serving sizes (33%). In the center store, Tastykake, manufactured by Thomasville, GA-based Flowers Foods, launched limited edition Black & White Mini Donuts, a powdered sugar-coated chocolate cake donut that was available from December through February.
Other big names in donuts are also finding success in seasonal and limited offerings.
Trendhunter.com, the world’s largest trend community, regularly features innovations from donut leaders such as Krispy Kreme and Dunkin’ Donuts. In November, Krispy Kreme kicked off the fall season with a donut-inspired cinnamon roll in Original Glazed and Cinnamon Toast Crunch. This was followed by a Thanksgiving-themed launch of “Gobbles of Gratitude,” which included donuts in Pecan Pie, Cranberry Orange, Dutch Apple Pie and a heart-shaped Gobbler donut with Thanksgiving sprinkles and a turkey face fondant piece.
Looking ahead to warmer weather, bakery suppliers are also preparing to ride the wave of seasonal success. BakeMark is bringing a sense of nostalgia and fun together with several fruit and lemonade cake donut recipes, including strawberry, raspberry and cranberry. Appealing to the collective appreciation of a cold glass of lemonade on a summer’s day, BakeMark is one of many companies translating beloved seasonal flavors into these kinds of sweet goods.
As “the world runs on Dunkin’,” the company is expanding its donut lineup by introducing global flavors.
In the past, this included caramel-filled Dutch pastries dipped in chocolate and garnished with a waffle cookie. Its Rocky Road donut, found in the UK and Europe, is a chocolate-filled yeast donut with chocolate icing topped with biscuit crumbs and mini marshmallows.
Donuts and other baked goods can also benefit from a focus on visual appeal and creative merchandising. This includes an emphasis on secondary locations, increased trade promotions and an intent to grow channels, including online.
Although donuts do not over-index with any particular demographic, Grzebinski pointed out that the category could benefit from an infusion of new blood. Adding ingredients with global inspiration such as moringa, mochi, ginseng, ginger, turmeric, cacao, yuzu and matcha could be the ticket to capturing a larger share of the growing Gen Z demographic.
Additionally, products with purpose are still a natural draw for younger shoppers with higher purchasing power and could provide an opening for donut producers to renew their focus on authenticity, transparency and sustainability moving forward.
This story has been adapted from the February | Q1 2022 issue of Commercial Baking. Read the full story in the digital edition here.
