Donut war is on: Being the first mover is a double-edged sword for MOD

India is a country that was for long invaded by people and cultures over and over again until they were mashed and assimilated together to form the country of today. That assimilation is best represented in our cuisine - a mixture that has welcomed oriental, Persian, European and even African influences.

When it comes to modern fast food though, we haven’t been waiting for someone to come. We got on to the burger explosion long before McDonald’s came to India, though the pizza wave came along as Pizza Hut looked this way. We have been right at the forefront of the cupcake revolution.

And we are doing that again with fried dough confectionery called the Doughnut or Donut.The popularity of donuts in Tier I India can be directly traced to one company, Mad Over Donuts (MOD), founded by Lokesh Bharwani, who studied in the US and took to this Americanconfectionery. “When I returned back to Singapore after my studies in 2004, I realized that there was no particular donut brand in the region. This was a business opportunity.” MOD is considered to be the first dedicated donut brand in India, though it was first registeredin Singapore under Himesh Foods.

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Entering India in 2008, the donut chain has fortified its position as the leading donut brand in the country, leveraging its first-mover advantage in the face of international competition comprising of Dunkin’ Donuts and Krispy Kreme.

Dunkin Donuts partnered with Jubilant FoodWorks Ltd., the company behind the pizza chain Dominos in India, and has opened four stores in New Delhi since 2012. Krispy Kreme, whichhas joined hands with Citymax Hotels India, part of Dubai-based Landmark Group, and franchise partner Bedrock Food Private Ltd., has opened four stores in Bengaluru till now.The delicious donut wars are on.

About a donut
Despite starting in Singapore, a country that offers a far more conducive environment to do business, Bharwani decided to bring MOD to India because of the larger market opportunity and the fact that Indians had a sweeter tooth than the Singaporeans. “Just like Singapore, India was not exposed to the donut culture,” he says.

Donuts were traditionally sold at bakeries in India and never sold under a particular brand, he says. So getting Indians used to the concept of donuts and standalone donut stores wasthe biggest challenge for Bharwani.

Because of this, he looks at being the first-mover as a double-edged sword. Good because there were no other players in the market. Bad because the entire responsibility of educating customers, testing the market, carrying out sampling etc. was done by MOD -they made the market that others are now entering.

Product development took a good one-and-a-half years - expert chefs, top bakery specialists and brand consultants in Singapore were brought on board to develop the product and brand identity for MOD. “We had a donut ready within three months of starting, but we wanted to launch the best product and that’s why a lot of time and effort was spent on it.” Today, interms of its offerings, MOD serves 80 different varieties, though only 15 are available at any given point in time in a store. The flavors of the toppings are carefully picked and customized. “We decided to keep the donuts eggless so we don’t have to cater to the vegetarian needs separately. Keeping the vegetarians out in India would mean a huge dent
in our customer base,” says Bharwani.

Bam, pow, burp
Bharwani has a clear focus of how the MOD brand would evolve in India from here on. Even though he is looking at opening 500 outlets over the next five years all across the country, he plans to keep the size of these outlets smaller compared to his competitors.

Dunkin’ Donuts plans to open between 80 to 100 outlets in the country over the next five years, housed in high street areas or malls. Officials from the company declined to disclosetheir plans for India.

Krispy Kreme is planning to open 35 franchise-owned outlets, which would be in similar locations. Currently in the south, Krispy Kreme has said that the company is looking at positioning the brand in a few north Indian locations. “Krispy Kreme is extremely popularin Asia and our experience with the Indian consumer shows Indians are very fond of sweets and believe in the concept of sharing. Coffee and doughnuts as a category has a huge potential in India and we expect the market to grow quickly over the next few years,“said Purwa Sinha, Managing Director of Bedrock Food.

The entry of the two American competitors in the donut business has not ruffled Bharwani. “The market for donuts is huge in India. The potential in the large cities is still not tapped fully and there are Tier II cities that need to be penetrated as well,” he says.

According to Bharwani, the entry of American brands will help in creating more awareness, which is a key success factor. That could invariably help the established brand more. TarunJain, Vice President for Food Services at Technopak Advisors, says that the players’ aggressive plans for expansion will create a buzz and will partially be instrumental in leveraging consumer product awareness. “This will also give an opportunity to the existing players in the caf segment to extend their product line and leverage their capabilitiesin this specific offering,” says Jain.

Be different, be Indian
On what will work to succeed in the Indian market, Jain says that there are many possibilities for brands to create different formats and experiences. “New recipes catering to the palette of Indian taste and preferences will also play a key role on the count of leveraging volumes and future sustenance.

The possibility of promotion in terms of combos, loyalty cards etc. are high to facilitate consumer product awareness and changing taste preferences.” Bharwani has added a section ofbeverages and cupcakes along with donuts. The brand has also upped its game in marketing and advertising.

“We now look at engaging with customers and using social media extensively. We spend on internal campaigns or we usually do a festival every five to six weeks,” says Bharwani. He is now looking at creating a cafe culture, where donuts meet coffee and more, to go withhis stand-alone quick-service stores - revealing that he has been quick to learn from his competition.

This article first appeared in Entrepreneur India magazine.