Fighting Obesity Dropping "Donuts"

Dunkin' Donuts decided it was time to drop the "Donuts" from its name. The move comes at a time when there is a growing focus on healthier lifestyles.

by UBS Editorial Team 04 Oct 2018

"America runs on Dunkin’" is and has been the brand motto since 2006. So, the fact that the doughnut shop is shortening its original name "Dunkin' Donuts" from 1950 to just "Dunkin'" isn't too much of a stretch. Dunkin' brands' CEO and Dunkin' US President David Hoffman said that one reason for the name change is that the brand is placing more of an emphasis on its coffee products. Profit margin for coffee also tends to be higher than donuts. This strategy comes at a time when consumers tastes are shifting to healthier diets. Fast-food restaurants like McDonald's have seen less foot traffic, and increased sales have been chalked up to price hikes, according to Bloomberg News.

Health Concerns

Chief Investment Office analyst Andreas Tomaschett points out that the global health and wellness food market is currently around USD 800bn, and is expected to grow by mid-single-digit rates according to a range of industry estimates. Part of the growth is driven by awareness and concern about rising obesity rates.

Obesity is a health concern that has been highlighted by the World Health Organization, with research that shows that in 2016 more than 1.9 billion adults were overweight, of which 650 million were obese. These figures are consistent with a landmark study published in the medical journal The Lancet in 2014, which found 671 million people were obese in 2013, out of a global overweight population of some 2.1 billion. This represents a more than doubling of the obese population since 1980.

"In our view, food producers and retailers need to be and are becoming part of the solution in the fight against obesity," said Tomaschett. "They are doing so in the following four ways: First, they are expanding their product offering into healthier categories, such as fresh and organic food. Second, food producers are reformulating the nutritional profile of their products, reducing their fat and sodium content, among others. Reducing saturated and trans fats should mitigate the risk of obesity. Third, companies are disclosing more on the packaging of their products regarding ingredients. The labeling shows the percentage of fat, sugar, and calories as a percentage of a recommended daily diet the product contains. Fourth, package sizes have been made smaller to reduce overconsumption."

Obesity is a UBS Global Wealth Management longer-term theme. In addition to food and beverage, fitness, and sportswear industries (prevention), and the healthcare sector (treatment) can benefit from this long-term trend. "We expect the most attractive and investable related markets to see medium- to high-single-digit growth rates," says Tomaschett.

The spelling of "donuts" changed from "doughnuts" in the mid-20th century, and many thought it was just a fad. But time and the Merriam Webster dictionary legitimized the new word. In the early 21st century, the move to a healthier American diet looks likely to have staying power as well.