YoNuts Product Description Essay

The product is a line of bake-at-home doughnuts. The name of the product is YoNuts, meaning "Your Doughnuts", because this might be the first time that a company has marketed doughnuts that you can make at home yourself.  The logic of the product is simple.  First, everybody loves doughnuts.  We can have fun with this, having a tagline like "Not just for cops anymore" or something like that, but the reality is that doughnuts are one of the most popular snack foods in America, the retail doughnut industry worth around $13 billion annually (IBIS World, 2014).  This includes both shops and doughnuts sold in grocery stores as well. IBIS estimates that the overall doughnut market has nearly 9000 competitors, ranging from small hipster doughnut shops like the trendy Voodoo Donut in Portland to giant chains like Krispy Kreme, Dunkin Donuts and Tim Horton's.  The packaged doughnut market is based mainly on large bakeries turning out fairly generic doughnuts, but the popularity of innovative doughnuts among today's consumers points to the opportunity for high-end doughnuts to be sold at the grocery level.

YoNuts will come in six flavors to start.  We will use focus groups to narrow down the flavors from a larger list of maybe 15-20 flavors, to ensure that the flavors we launch with are the most popular.  We will rotate through selections as well, maybe seasonal flavors, like a pumpkin pie donut in the fall.  They will be packaged in the frozen foods section, and heated from the frozen state in a normal oven.  Packages will contain with six or thirteen doughnuts (baker's dozen, a key gimmick).  

YoNuts will have a few competitive advantages.  The first is that compared with other take-home doughnuts, YoNuts will have a much broader and more innovative selection of flavors.  These will range from hipster classics like maple bacon to entirely innovative selections like morel and bourbon or even savory flavors like roasted Hatch chile.  The possibilities are endless.  While other packaged doughnuts are focused on 1950s flavors like powdered sugar, YoNuts will bring the packaged doughnut business into the 21st century. The inspiration for this comes from Ben n' Jerry's and Haagen-Dazs.  Those companies in part earned their success with innovative flavors that more traditional ice cream companies were not doing at the time.  That is what we are going to do with doughnuts.

The second major competitive advantage is that YoNuts will be cooked at home.  Normally, doughnuts are deep fried, and since most Americans do not have a deep fryer, it is basically impossible to produce doughnuts at home, or if it can be done it will be very messy.  To solve this problem, we looked at the opportunity that was created by the French fry industry.  Fries are also deep fried, but when companies started finding ways to allow people to cook fries at home, fry sales in supermarkets went from not much to billions.  Our food scientists have developed a way to cook doughnuts in the oven that are just as good as doughnuts at the store, and better than any other supermarket doughnut.  Krispy Kreme taught us that people love hot, fresh doughnuts, and we all remember those mini-donuts from the fair, too.  By solving the problem of producing doughnuts in the average American kitchen, we have created what we believe is a new market, and the freshness gives us a competitive advantage over any other doughnut you can buy in a grocery store. For most people, YoNuts will be the only way they can get a truly fresh doughnut, since even many doughnut shops ship doughnuts in from faraway bakeries.  So with the best flavors and the best freshness, there is little doubt that YoNuts will be a very popular item.  

With respect to market share, YoNuts will be positioned as a premium product.  The innovative flavors and freshness make YoNuts the most compelling proposition in the doughnut sphere in any grocery store.  The price point will reflect that, being above other doughnut products but still below the individual doughnut price one might find at a typical fancy hipster doughnut shop.  What this implies for market share is that this will always be a niche product.  YoNuts will need to look to similar products in other spheres - the aforementioned premium ice creams, craft beer – for market share trajectories.  While both of those products are becoming quite a bit more mainstream, and reaching double digit shares in some markets, the reality is that they started relatively small.  A first year target share should be 0.5% nationwide, and 5% for the first five years would be excellent.  Constraints to market share adoption will be the price point, the uniqueness of the product, and distribution considerations. It might take a year or two just to scale up to national distribution. Further, we need to get shelf space with major retailers, which is another constraint.  For example, if we don't sell at Wal-Mart, that's 30% of the grocery market we cannot sell to.  So 0.05% share for the first year is pretty optimistic.  The grocery doughnut business is a percentage of the total doughnut business, and a 0.05% share would still represent a solid $3 million in sales, which would feel pretty good.

Sales should double each year for the first five years at least.  If that happened, we would hit the $48 million sales mark by the 5th year, which would be spectacular. Assuming we achieve national distribution, this seems reasonable, and of course we would be able to support this with advertising.  The following table highlights are targets, which are based on best case projections and a total market size of $6.5 billion for the packaged doughnut market.  We would still have a very small overall share by the end of the 5th year, but maintaining this growth would give us an important foothold in this competitive business.

Year

Sales (million $)

Growth (%)

Share (%)

There are many different ways to understand the target market, including demographic, psychographic and behavior.  The target market for YoNuts will be explained using all of these.

Demographics reflect things like geography and basic characteristics of the purchasers including income, education, race, gender and age.  Doughnuts are one of the most popular snacks in America and this is because they have broad appeal.  Geographically, we intend first to target urban areas, where people are likely to have higher incomes, more open-mindedness with respect to foods, a larger appetite for luxury snacks and the high  population densities needed to sell a good volume of high end product.  The Pacific and Atlantic coasts are therefore the key targets.  Inland markets will be targeted in a more select manner – we want to be in cities like Denver, Chicago, Austin and Dallas but maybe are less concerned with middle America.  

Our target market has a higher than average income.  This is because we are a premium product, and doughnuts are entirely discretionary purchases.  To spend extra money on a premium product you don't need typically requires not only good taste, but a fairly high amount of disposable income.  Likewise, our customer therefore also has, in all likelihood, a university degree or higher, as there is a high correlation between education and income.  

Our target customer is between the ages of 21-45.  Individuals will typically be less open-minded about new foods as they age, so even wealthier, urban individuals over 45 are less likely to adopt our innovative new product.  Younger customers are going to be the early adopters who drive sales for the first several years – only at that point will others from outside the target market start to seriously take interest in our product.  Thus, younger, educated, urban dwellers with above-average incomes comprise the base target market.  Our target market will have more unmarried couples and more singles than the market average, because of their younger age.

To further refine, this our study of psychographics and behavior tells us that there is a common young urban culture that transcends race to some extent – when someone fits all of the other characteristics they are probably going to be a target customer regardless of color or creed.  With respect to gender, however, it should be noted that while females in the target market do enjoy a good doughnut every once in a while, they are probably less voracious consumers than males, who are more apt to eat multiple doughnuts at once, or more doughnuts per week.  Among our target market, "traditional" gender roles with respect to purchasing are not as strong as among older generations, so men are just as likely to be purchasing food as women. Thus, it is reasonable to ensure that males are targeted as they are likely to both purchase and consume the doughnuts more often.  Preparation is not expected to be a factor because our target market is more culinarily adventurous, and therefore not intimidated by putting doughnuts into an oven.