Enjoy a 15% discount on all purchases until the 31st of March 2023 using the promo code EOFWEB22 at check out!

Services Our expert insights reveal the key consumer and industry trends shaping global services, including best-in-class innovations in technology, customer experience and sustainability to thrive in dynamic times.

The Doughnut Paradox: Indulgence Positioning in a World Obsessed With Health and Wellness

Euromonitor International Profile Picture
Euromonitor International Bio

Every year health and wellness is one of the top trends in foodservice. It’s a trend that varies by market, both in terms of magnitude and by definition, but it’s something that touches every major market category. In recent years, it’s become even more important, as worldwide obesity concerns rise and consumers continue to prioritise quality and lifestyle benefits when making foodservice decisions, aiming to feel good about what they’re eating, and who they’re buying it from.

But amidst this global trend, indulgence positioning has always had a place—and a very lucrative one. Doughnut chains have been thriving across Southeast Asia for years, the US hops from one over-the-top indulgent bakery trend to another, from cupcakes, to artisan doughnuts, and even “Cronuts”, and fried dough of some form or another fills a prominent role in many global dining cultures, from Tim Horton’s doughnuts in Canada, to traditional pastries in the health-obsessed Brazil.

On the surface, this can seem confusing. If all trends are moving toward higher-quality, fresher, healthier food, then why are indulgent chains still performing so consistently well? And muddying things further, those chains having the most success are not those that have tried to improve their positioning in line with trends by offering healthier items—rather, the reverse has almost appeared to be true. Rather, the most successful chains are those that are bucking the health and wellness trend entirely, offering over-the-top indulgences, and never apologising for it.

As to how this can possibly be the case, the answer is surprisingly simple: Rather than succeeding in spite of health and wellness trends, the indulgence trend is growing alongside them, benefiting from the same underlying demand factors while exploiting them in an entirely different way. The undercurrent of the move toward higher-quality dining experiences has been a growing need to maximise the value of every foodservice expenditure, whether at a bakery fast food outlet or a fine dining restaurant. For many, this has manifested as food that feels “worthwhile,” incorporating the freshest ingredients sourced from sustainable sources. But for others, it has meant that splurging on something truly indulgent every once in a while is even more important, as long as the experience feels special enough to be satisfying. Further, while the better ingredients trend in burger fast food may lead to more fresh produce on menus and high-quality toppings on burgers, in bakery products fast food it means the use of whole milk, real butter, and none of the low-calorie substitutes that are traditionally used to improve nutrition labels.

Quality = Enjoyment = Indulgence

In the US, these parallel trends have been particularly easy to observe throughout the recession. When consumer confidence began declining and customers found themselves being forced to cut back on their spending, they had two primary options: Either spend less on just as many trips, or make fewer purchases, while spending less each time. As has been thoroughly documented, most US consumers chose a combination of the two: trading down to restaurants in lower price-tiers, but making their purchase count, opting for premium fast food options, fast-casual meals or low-priced “small indulgences” like specialty beverages.

Broadly speaking, this led to a surge in health and wellness-related demand, as customers associated premium salads and burgers with a higher-quality, higher-value dining experience. However on a smaller scale, it also fed into a boom in highly indulgent bakery products fast food chains. Along with some help from popular culture, cupcakes went from old-school birthday party standby to gourmet must-have, appearing first in a surge of cupcake chains and eventually making their way into specialist coffee shops and even on to full-service dessert menus. These cupcakes looked pretty, tasted good, and were perfectly portioned for individual indulgence—a pastry that felt like an event, rather than a simple dessert. Likewise, these cupcakes were positioned as super-premium items, incorporating specialty ingredients like Valhrona chocolate and Tahitian vanilla to justify prices as high as US$3-$5 per item. The largest chains grew to become national phenomena, including Crumbs Bake Shop which has 50 outlets and is now a publicly traded company.

While the cupcake trend busted nearly as quickly as it boomed, its success was by no means a fluke. The trend simply gave way to new bakery goods concepts, including artisan doughnuts, artisan ice cream parlours, pie shops, and all manner of other trendy, modern, gourmet outlets that trade solely on the idea of giving in to the indulgence of a small luxury at low cost and high “value”.

These indulgence trends have been particularly notable in how quickly they rise and fall, but doughnuts and pastries have long been an important—if often overlooked—part of the US fast food landscape. Chains like Krispy Kreme and Cinnabon have been making money off of them for years, and not coincidentally, both chains have recently undergone significant turnarounds. Both were the result of having briefly lost their way and then finding a new, more successful niche amidst the current consumer climate with a more honest interpretation of their core indulgence positioning: We may not be healthy, but we taste good, and we’re worth it. This strategy has paid off handsomely, leading both chains to experience their highest recent growth rates in 2011 and 2012, at 8% during both years for Krispy Kreme and 10% for Cinnabon.

Indulgence Works, but Only if It’s Honest

Krispy Kreme and Cinnabon have experienced similar arcs, if for very different reasons. The former, in particular, lost its way throughout the early aughts due to a combination of operational and strategic missteps that led to its brand feeling less like a special occasion indulgence, and more like an everyday compromise.

While experiencing a huge boom in expansion during the late ‘90s, Krispy Kreme initially performed well. The brand was very good at generating free marketing through doughnut giveaways and word-of-mouth publicity, and as a result grew a cult following of devotees who remained ever on the lookout for that neon “hot doughnuts” sign on the side of the road. Then in the hopes of increasing distribution and maximising revenues, the company began building out its wholesale business, offering their famous doughnuts through grocery stores and even convenience store fast food outlets. The result was a dilution of the company’s brand value, and a loss of what made Krispy Kreme so special in the first place. Doughnuts that could be bought by the dozen, cold and not entirely fresh, at any grocery store or gas station no longer felt like something worthy of an indulgence, and sales plummeted until the company corrected the issue in more recent years. Krispy Kreme also added a premium coffee-based specialty beverage line, adding incremental sales and appealing to morning coffee-and-doughnuts devotees.

Cinnabon found success recently by strengthening its brand through the opposite tact: Getting their brand in more places rather than fewer. Cinnabon entered into licensing agreements with other fast food chains like Burger King and Taco Bell, and has even made its way into packaged food products like cereal and ready-to-bake Pillsbury cinnamon rolls, through its trade-marked cinnamon, Indonesian Makara.

Making Cinnabon synonymous with indulgence through many channels has helped a trip to one of its outlets feel special enough to warrant its signature items’ 800-1,000 calories. For similar reasons, attempts to make Cinnabons healthier were all quickly abandoned after testing: Whole wheat or shrunken buns did not catch on, and a savoury “Pizzabon” item fizzled in like fashion.

The lesson from both of these chains supports our earlier thesis: Americans are willing to indulge in sweet bakery goods, and always have been, as long as the indulgence is worth it. Recent trends toward prioritising the dining experience have only made this preference stronger, and as US consumers make more conscious dining decisions throughout the rest of their meals, it makes the desire to let go once in a while—have that Cronut, that $5 cupcake, or that softball-sized cinnamon roll—even stronger.

Indulgence is an Event

Broadening things further, this trend is reflected in even more ways in international markets. Doughnuts have always been particularly popular in Southeast Asia, where chains like Mister Donut, Dunkin Donuts, and Krispy Kreme all battle for share of a large and rapidly growing category. In Thailand, bakery products fast food grew at an average annual rate of 8% over 2007-2012, adding US$88 million. Much of this trend was driven by leading doughnut chains, which together claim at least a third of the local bakery category. This predilection for doughnuts is by no means confined to Thailand, either: Mister Donut has become so popular across Southeast Asia that it now claims 20% of all Asia Pacific bakery products fast food value.

Beyond the tradition of frequent snacking throughout the day in some key Southeast Asian markets, doughnuts perform so well in the region as a result of some of the same factors driving indulgence demand in North America.  Baking at home is relatively rare, and in fact, it is very common in many Asian markets for homes to not have ovens at all. As a result, bakery goods are, by definition, a special indulgence worthy of a trip to a foodservice outlet. This gives these chains the benefit of a kind of built-in luxury, entertainment-based positioning that those in other regions have to work hard to foster themselves.

What all of this sums to is the idea that indulgence positioning and health and wellness positioning actually go hand in hand, and the real trend here is that consumers continue to seek out more and better in all of their dining decisions. They’re looking for value—in all of its forms, whether financial, quantity-based, moral or in terms of indulgence—and they’re willing to consider all kinds of foodservice experiences, as long as they feel worth the trip. The key to indulgence is recognising that the indulgent nature of the product is the value, and working with that benefit instead of against it.

Interested in more insights? Subscribe to our content

Shop Our Reports

World Market for Duty-Free: Unlocking Value and New Opportunities

The outlook for world duty-free looks rosy, as pent-up demand and the recent reopening of China are powering tourism recovery, despite the headwinds caused by…

View Report

Disruptive Trends of Digital Banks in Asia Pacific and Australasia – How to Win the Profit Battle

Benefiting from growing smartphone penetration, supportive regulations and so on, a growing number of digital banks have been launched, challenging the…

View Report

Car Rental: Top Six Industry Trends

This report examines the global car rental industry, providing analysis on market sizes, brand and company shares, growth trends over the review period and…

View Report
Passport Our premier global market research database with detailed data and analysis on industries, companies, economies and consumers. Track existing and future opportunities to support critical decision-making across all functions within your organisation Learn More