Wild About Donuts

Image courtesy of Donut Fest
 
When the three most popular bakeries in the United States are donut shops, based on a Travel + Leisure magazine report citing Instagram data, it may be time to officially proclaim the donut as America’s favorite sweet baked good, surpassing the once beloved cupcake.
 
Instagram recently examined the most-photographed places on its app and delivered an enlightening list of the country’s top 15 bakeries and cafés that appeared on users' feeds in late 2016, according to Travel + Leisure.
 
Topping the charts was Café du Monde, the iconic New Orleans where beignets (square French-style donuts) have been served since the original coffee shop opened in 1862.
 
Ranking second and third, respectively, were Portland, Oregon-based Voodoo Doughnut and California Donuts in Los Angeles.
 
“Paying attention to trends and what’s happening in the food world is what helps us be in the know,” says Danette Kuoch, manager of California Donuts, which opened 35 years ago as a tiny donut shop but catapulted into fame based on its eye-catching, photo-worthy creations. “We have now become a late night dessert spot in Los Angeles. Our product is unique. We are inventors, not followers.”
 
It’s quite amazing to point out that her parents fled Cambodia during the Vietnam War and came to Los Angeles as refugees, looking to pursue the American dream.
 
Decades ago, donuts represented a low-cost business startup for many Cambodians in Southern California. According to a 2010 article in The Atlantic magazine, Ted Ngoy led the way after immigrating in 1975 and opening a chain of donuts shops once he learned the business. Ngoy reportedly trained a wave of Cambodian immigrants that followed and, by the mid-1990s, 80 percent of California's donut shops were Cambodian owned and operated.

 

Fast forward to 2017, and donuts are no longer synonymous with the word bargain. Many shops sell gourmet donuts that are as colorful as they are costly. London’s Dum Dum Donutterie reportedly serves a $1,975 donut topped with Cristal champagne caviar, gold leaf, Tahitian gold vanilla beans and Italian-made Amedei Porcelana chocolate, as reported by The Daily Mail. There are numerous shops in America selling gourmet donuts every day for $3 to $4 apiece.
 
Specialty donuts at California Donuts sell for $2, $2.50 or $3. The specialty menu includes their signature Panda donut made with Oreo pieces, Blueberry Toast Crunch, Strawberry and Nuts, Samoa, and Lucky Charms.
 
To say that Kuoch and her creative social media team are savvy is a massive understatement. California Donuts boasts a whopping 463,000 followers on Instagram. They are equally active on Snapchat.
 
“First of all, having a product that attracts the eyes of others is important to building relationships on Instagram and with Snapchatters,” Kuoch says, adding a warning about when and when not to post. “If you have great content to post, the more you post, the better. But if you don’t have great content, it’s better not to post at all.”

 

Donut success in all sectors is pushing the creativity of retail donut shops in interesting ways.
 
Macro trends

It’s no wonder that retail donut shops are pushing the envelope on their donut creativity, as they are pushed harder by greater competition for donut sales from the supermarket and convenience-store sectors.

US retail sales of donuts at supermarkets and convenience stores reached $1.97 billion for the 52 weeks ended Nov. 27, 2016, which was up 3.4 percent from the previous 52 weeks, according to Information Resources, Inc., a Chicago-based market research firm. Over the past four years, supermarket sales of fresh donuts have risen by an average of 5.2 percent a year.
 
Acquisitions have two leading donut makers taking different paths. Hostess Brands, Inc., after being acquired by Gores Holdings, Inc., became a publicly traded company. Krispy Kreme Doughnuts, Inc. turned into a private company after JAB Beech, Inc. acquired it.
 
Krispy Kreme Doughnuts had 1,133 stores worldwide when the first quarter ended May 1, 2016, which compared with 1,003 at the end of the previous year’s first quarter. Krispy Kreme stopped trading on the New York Stock Exchange after JAB Beech, Inc., an indirect controlled subsidiary of JAB Holding Co., completed its acquisition of the company on July 27, 2016. The portfolio for JAB Holding Co. includes coffee companies Keurig Green Mountain and Jacobs Douwe Egberts. The transaction had a total equity value of about $1.35 billion. 
 
“JAB’s experience and industry knowledge make them the ideal partner to help grow the iconic Krispy Kreme brand throughout the world,” said Tony Thompson, chief executive officer of Krispy Kreme, when the deal was first announced May 9, 2016. “We remain focused on our long-term strategy and continuing to offer our premium, high-quality donuts and sweet treats to consumers around the world.”
 
Krispy Kreme Doughnuts continued to focus on limited-time offerings in 2016, featuring the Zombie donut, the Pumpkin donut and the Spider Web donut in October; and the Melted Snowman donut and the Santa Belly donut in December. Also in December, the company introduced a Nutty Cocoa Ring donut that is dipped in Nutella hazelnut spread, topped with crunchy hazelnut pieces and drizzled with chocolate icing.
 
For the second straight year, data from Chicago-based market research firm Information Resources, Inc. show strong sales performance for several sweet goods categories.
 
In the 52 weeks ended Nov. 27, dollar sales in the pastry/donuts category totaled $4,902,202,718, up 4.8 percent from the same period a year ago, according to IRI. The pastry/Danish/coffee cakes sub-category delivered $1,986,341,337 in sales during the period, up 4.5 percent from a year ago. The biggest boost came from private label products, which experienced an 11.4 percent uptick in sales growth during the period.
 
The donuts sub-category increased 3.4 percent to $1,971,202,966, led by an increase of 11.3 percent for Hostess Brands, Inc., and the muffins sub-category increased 8.5% to $944,658,414, led by a 13.6 percent gain at Grupo Bimbo and a 13.2 percent increase at Hostess Brands, according to IRI.
 
Kansas City-based Hostess Brands is expanding its product portfolio to include more nutrition-oriented products and earlier this year introduced a new Mini Muffins formulation that has the nutritional benefit of 8 grams of whole grain per serving.

 

Gourmet donuts are a key to donut shop success.
 
Since the first donut shops began lining the streets of major US cities during the 1920s and ‘30s, the fried donut (which originated from the Dutch name olykoeks, or oily cakes) has served as one of America’s favorite breakfast foods. That is, until today.
 
The new cream of the crop in the donut world has elevated the humble donut into a gourmet dessert, as evidenced by recent examples like the Crab Rangoon served by Strange Donuts, a 2½ year-old shop based in St. Louis. Each week on Thursday, Friday and Saturday nights, Strange Donuts concocts “crazier” versions, which they call “Strangers,” and sells these elaborate donuts for $5 apiece to an ever-growing group of fans. A local chef helped them devise the Crab Rangoon donut, filled with cream cheese and crab, along with sweet and sour sauce.
 
“We are collaborating with big-time chefs to make our Strangers,” says Jason Bockman, who owns Strange Donuts with business partner Corey Smale. “This helps get the local community talking about us and the chefs we work with.”
 
Well over half of their sales come after 10 a.m., making Strange Donuts part of the growing movement of donut shops that are profiting from a recent surge in demand for donuts as decadent afternoon and late-night snacks.
 
It is becoming quite evident that donut shops like Strange Donuts and Firecakes in Chicago are picking up where the cupcake movement left off, by using a bakery item as a platform to create a menu full of fun and interesting tastes. Forget 31 flavors. Strange Donuts makes more than a hundred.
 
The three-location shop offers vegan and gluten-free options in addition to $1 apiece Classics (glazed, rainbow pony, jelly filled, salted caramel) and $2 apiece Creations (blueberry cheesecake, red velvet, campfire and gooey butter, a St. Louis favorite patterned off gooey butter cake).
 
Strangers are billed as a meal in itself. Past versions include Chicken & Waffle, Mai Lee Restaurant Pho King Done, Pi Pizza Done, and Bogart’s BBQ Rib Done.
 
“We offer 12 kinds of donuts a day to keep it simple for the customer,” Bockman says. “But over a year, we create hundreds of donut varieties.”

 

 
Donut Fest 

In Chicago and New York, the race to create the most flavorful donuts has reached new heights with a now annual competition called Donut Fest. 

On Sunday, January 31, Firecakes returned as the reigning champion to compete at the 2016 Donut Fest, showcasing their newest creation, the Maple Glazed Candied Peppered Bacon Long John filled with Maple Cream.
 
Owners Jonathan and Karen Fox started Firecakes Donuts, available at three locations in Chicago, to give customers “the same exhilarating sensory experience that people used to get at the traditional neighborhood donut shop.” Says chef Jonathan Fox: "We use the best traditional donut recipes and apply sophisticated techniques to produce layers of flavor that take our donuts to another level. For example, we don't just roll our coconut donuts in shredded coconut. Rather, we roll them in three different kinds of coconut, each with a different texture, making the experience much more interesting and tasty." 
 
According to event organizers, Donut Fest is a “celebration of the love of fried sugary dough with a competition of yeast, battery, deep-fried treats.” Top restaurants and bakeries in Chicago and New York submit their best cruller, ring or long-john and compete against each other (one competition for each city). The winner earns the coveted title of "Best Donut."  
 
Gurnee Donuts, which opened in 1994 in Gurnee, Illinois, won Chicago’s Donut Fest 2016 with its creative purple yam Ube Donut, a limited-time offering available with options of coconut topped, glazed or vanilla frosted.
 
The Chicago fan favorite awards went to Stan Donut's Biscoff Banana Pocket donut, filled with Biscoff cookie butter spread and fresh sliced bananas, and Chemshaw 13 Donutz's Fantastic 4 Caramel donut.
 
In New York City’s Donut Fest 2016, the judge’s choice award went to Glaze Donuts, based in New Milford, New Jersey. Owner Jule Hazou won the grand prize for the family-owned shop’s Cannoli donut, filled with cannoli cream and topped with crumbled cannoli shell pieces. Glaze, which opened in 2014, features dozens of creative varieties like the Bananas Foster, which is filled with Bavarian cream topped with cream, bananas, pecans and caramel drizzle.
 
The crowd favorite award in this year’s New York City Donut Fest went to The Doughnut Project, a 2-year-old bakery opened by founders Leslie Polizzotto and Troy Neal in the West Village of Manhattan. They make small batch, hand crafted yeast donuts to order.
 
Varieties at The Doughnut Project include the Bulletproof Tiger (pineapple with habanero stripes), Those Beetz are Dope (beet stuffed with ricotta), the Pumpkin King (cinnamon with roasted pepitas) and the Costanza (salted chocolate with buttered pretzel).

California Donuts is one of countless donut shops across America that is finding success.
 
All across America, donut shops are flourishing.
 
“The only thing that slows us down is when people can’t get here because of the weather,” notes Bob Kenny, owner of Doughboy Donuts, which has two locations in Reno, Nevada.
 
Russ DiGilio, founder and owner of Duck Donuts Franchising Company LLC, recently announced the expansion of his donut franchise to the college town of Knoxville, Tennessee. The Knoxville location is the first of several franchises slated to open in the Volunteer State.
 
The Knoxville store opened in January, offering “warm, delicious & made to order” donuts,” inside a 1,200-square foot Duck Donuts store. There is indoor and outdoor seating with the franchise’s iconic beach theme, and a family-friendly atmosphere.
 
“We are thrilled to kick off our venture in Knoxville and bring the Duck Donuts experience to college students, residents, visitors, and donut lovers,” says Baker Bell, one of the franchise owners. “The Knoxville business community has welcomed us with open arms, and we are excited to support them with our Chamber membership and community investments.” 
 
In Kansas, longtime downtown restaurant owner Nick Wysong is leading a group that will open Wake the Dead: Chicken, Whiskey, Donuts in downtown Lawrence, Kansas, a college town and home of the University of Kansas. Wysong is the co-founder and owner of the popular downtown restaurant Ingredient and also the former owner of Harolds Fried Chicken & Donuts. That was the short-lived restaurant that operated out of the Miller Mart gas station in Lawrence. Wysong told the Lawrence Journal-World that the concept of fried chicken served with a donut developed a bit of a cult following during the year that Harolds was open.
 
Wysong said his new restaurant will be a fully functioning donut shop, as well as offer a large selection of “top shelf whiskeys.” It also, obviously, will have evening hours. Wysong said he expects to try about 60 donut recipes, although he plans to start with about a dozen varieties available daily. “We’re going to do this right and do it well,” Wysong told the Journal-World. “But the donut element is going to be huge. We’re super stoked about that.” 
 
In Oklahoma, Belle Kitchen recently landed on Travel Channel's list of the "Best Doughnut Shops in America." The Oklahoma City-based bakery, which recently expanded into the Deep Deuce area in Oklahoma City, has been creating their highly acclaimed fresh, square doughnuts by hand for just over a year.
 
"Fresh, beautiful and huge best describes our doughnuts," says Cheryl Davenport, the founder of Belle Kitchen. "We use only the very best ingredients. Our dough takes about 24 hours to produce and results in a light and fluffy doughnut that is perfectly complimented with fresh, seasonal, super flavorful glazes like roasted strawberry lime, vegan hibiscus, bacon maple, gluten free mixed berry and black cocoa powder old fashioned douuts."
 
Originally from Canada and then Seattle, Davenport saw a need in the marketplace and developed the idea for gourmet donuts in Oklahoma City. She took months to perfect the recipe and built two locations to serve her Oklahoma customers.
 
"Having worked for Microsoft and Hitachi taught me that innovation and creation are cornerstones of great ideas, but owning a small business marketing agency taught me about the importance of the customer. We want our customers to be to delighted with visit, finding new and beautiful treats as well as their favorites in the case," says Davenport.
 

 

California Donuts is adept at using social media to build interest.
 

Along with Instagram and Snapchat, California Donuts utilizes social media sites like Facebook to generate excitement about its brand and monitor customer demand and activity. One new Facebook feature that helps accomplish this mission is called Popular Hours, which shows when the bakery is busiest. For example, Popular Hours reveals that walk-in traffic at California Donuts in Los Angeles peaks between 10 p.m. and 11 p.m. every Friday night.
 
According to Merchant Centric, Facebook’s Popular Hours works similar to Google’s Popular Times feature, showing when a merchant is busiest. While Facebook hasn’t released any official documentation about this feature, the site likely collects the information in a way that is similar to Google, by tapping into the mobile phone data of customers who allow Facebook to track their location.
 
Another thing that may increase the reliability of Facebook’s Popular Hours, is the potential for incorporating data that comes from user check-ins and comments on the site. Many of the people who don’t turn on mobile location services will still check-in or mention businesses in a post. Such users can be tracked over time to determine their habits regarding visits to specific businesses, according to Merchant Centric. The benefits include the ability to adjust staffing to your bakery’s peak demand or run special promotions when traffic is slow.
 
If you know you are going to be busy on specific days and times, then special offers are unnecessary during those times. The trick is to find your slowest times, and then offer special discounts to encourage people to come in when they normally would not. For example, bakeries could offer an afternoon cookie or donut promotion if they expected business to be slow on, say, a Tuesday or Wednesday.
 
Other donut shops have used new technology to their competitive advantage. Opening in Durham, North Carolina, in 2012, Rise Biscuits and Donuts had a simple plan to create delicious food at an affordable price. 
 
“We started as a chef-run local store with no intention of franchising” says Sylvia Steere, director of technology at Rise Biscuits and Donuts. “In the beginning, we changed our menu every couple of days, and didn’t even take inventory.” 
 
Once Rise was approached about franchising, the brand quickly began to grow, as Steere pointed out: “With so many new stores opening in such a short time frame, we really needed to find a way to use technology to ensure quality and consistency in all of our locations.” 
 
Rise implemented Ctuit RADAR into both their corporate and franchise locations in order to get a better view into each store’s data trends. “It is helpful to be able to view and compare all of the stores’ data and data history weekly, monthly, quarterly at any given time from any location. Before RADAR, we didn’t have a way to compare metrics. We drove from store to store to keep in touch. With our growth taking us to so many new states that is just no longer possible,” Steere says.
 
Currently with 10 locations (with expansion plans in Texas, Georgia, South Carolina and Kentucky), Rise serves biscuits and donuts from 7 a.m. until 2 p.m. every day. The donut menu features an assortment of old school, new school, and specialty donuts with interesting and unusual flavors like pineapple basil with pistachios. They also make a hybrid called a “donnoli,” which is half donut and half cannoli that is filled. Their biscuit menu features everyday favorite fillings like country ham, bacon, sausage, fried chicken, and fried eggplant “bacon,” as well as a variety of cheeses, spreads, and eggs.