How Deux is challenging donut brands like Krispy Kreme and Entenmann’s

Brands on the Rise is a regular Ad Age feature spotlighting the marketing and business tactics of successful challenger brands. Read other installments here. When better-for-you donut holes and cookie dough brand Deux’s CEO and founder, Sabeena Ladha, was growing up, she spent most nights and weekends in the gas station convenience store that her father owned and operated. The highlight of her evenings was taking “one salty snack, and one sweet snack” from the store’s shelves to munch on while she worked the cash register with her father and sisters. “I grew up on the standard American diet, like Kraft Mac and Cheese and Oreos,” she said in a recent interview. “I didn’t have, you know, Erewhon next door to go get fresh salads and healthy smoothies from.” That’s partly why in October 2020 Ladha founded Deux, which is enjoying recent sales and distribution momentum driven by its healthy positioning. Deux’s website claims that the company “removed all the ‘bad for you’ ingredients (refined sugar, preservatives, animal byproducts)” in its products “and added in ‘good for you’ functional ingredients like zinc, elderberry, and aloe vera.” The products are geared towards “Gen Z and millennial females,” Ladha said, noting that the demographic is increasingly investing more time and money into health and wellness. Plus, “women are two and a half times more likely to crave something sweet than their male counterparts,” she added. Recent news: 20 brands catching Gen Z’s attention “We’re trying to make women have a little bit more free food freedom” and less guilt about their little indulgences, said Ladha, who just so happens to have a background in junk food. Early in her career, Ladha worked in marketing at PepsiCo on the Lay’s team before eventually transitioning into the venture capital space. Ad Age Leading Women Luncheon Join us Aug. 7 in New York as we recognize this year’s honorees Buy your ticket today Deux’s metaphorical dough is rising, too—revenue grew roughly 200% between 2021 and 2022. Although it hadn’t closed the books on 2023 as of this writing, Ladha estimated that revenue grew about 30% year over year. What’s more, a few months ago when the brand turned three, it hit 1 million units sold. While Deux is no Krispy Kreme, experts predict that the small company could become the Halo Top of donuts, referring to the lower-calorie ice cream brand that quickly grew into a significant player in a category traditionally dominated by full-calorie offerings. Below, more on Deux’s origin story, its marketing strategies and what’s next. How it started The original concept for the brand was a multivitamin in the form of a small cookie, inspired by more people hunting for vitamins while trying to stave off COVID-19 in the early days of the pandemic and the “food as medicine” trend that came with it, Ladha said. Soon, the idea morphed from vitamin cookies into a healthier version of cookie dough, as Ladha saw cookie dough as “a massive space that was not disrupted for many years.” “That space in the grocery store is really old school,” she continued. “You’ve got Pillsbury and Nestlé, and that’s pretty much it—there’s not a lot of innovation,” she said. While cookie dough was Deux’s first product line, it soon expanded into donut holes, which Ladha said is now Deux’s fastest-growing category. Because this was all happening during the early months of the pandemic in Los Angeles, Ladha had to do her market research from a safe social distance. She and her husband “sent out this massive survey to our networks” asking them to try the product and give feedback. Around the same time, she also created Deux’s Instagram. That way, when she delivered mason jars full of cookie dough to people’s doorsteps, the recipients would often not only follow Deux on Instagram but tag them in what became Deux’s early user-generated content. For roughly six months, from October to March, Ladha said she would “make the product until like 2 in the morning,” at home with a commercial mixer, then “wake up at like 7, make more product, pack boxes and drive my SUV to UPS to fulfill orders.” Ladha said she spent a bit more than $20,000 of her savings to get the business up and running for those first few months. But by January 2021, she had decided that she had enough data to go out and raise funding. Tipping point In its first year in business, Deux did $1.2 million in revenue, according to the brand. Soon, it raised funding on a $6 million SAFE note, she said, referring to an investment vehicle in which investors provide funding that is not converted to equity until the business reaches a pre-defined financial goal. Momentum grew in 2021 thanks in part to an appearance on ABC’s “Shark Tank.” The brand also gained distribution at Whole Foods and was accepted into Target’s accelerator program, which helps start-ups. View this post on Instagram A post shared by DEUX (@eatdeux) In Ladha’s opinion, food brands “have a cap” on how much revenue they can make selling their products direct-to-consumer. “So those two things, retail approval and media approval combined, were the ‘aha moment,’” she said. Marketing strategies One of the first marketing decisions Ladha made? Opting not to use a branding agency. “When we first launched, I was really hell-bent on not spending $100,000 on a branding agency,” she said, adding that most of her founder friends at the time were creating “these beautiful brands with, like, Red Antler.” Ladha said she didn’t want to spend her own money on a brand that was in its test phase. “I wanted to wait until there was product market fit,” she said. She is also of the opinion that branding agencies “take all of the personality out of a brand,” she said, adding that building it in-house felt more organic. The brand aims to set aside 20% of its revenue for its marketing budget, a Deux spokesperson said. Deux dedicates roughly a third of its marketing budget to brand and influencer collaborations, another third to paid social media ads, 20% to marketing stunts and the rest to in-person activations, Ladha said. Deux’s 2023 marketing budget was under $1 million, according to the brand. For context, donut competitors Entenmann’s and Krispy Kreme spent $3 million and $8 million in U.S. measured media during the first half of 2023, respectively, according to Vivvix, including paid social data from Pathmatics. Deux’s influencer strategy is a multi-step process full of safeguards to ensure that it is only spending its marketing dollars on influencers who are effective. Deux’s social media team messages influencers deemed to be a good fit for the brand and asks if they’d like some samples. Currently, they’re messaging between 25 and 30 influencers per week, according to Ladha, noting that Deux tells these influencers they don’t have to post if they don’t want to. Inevitably, some of the influencers end up posting. If they do—and if Deux sees a spike in Shopify sales after the fact—they reach out to them and ask if they would be interested in a paid partnership. “We track methodically if they post, because not all of them do,” Ladha said. More creator and influencer news from Ad Age “We’ll do paid partnerships with ones that basically are off the charts when we seed them because we know their audience is interested in our brand and we know that they’re high converters,” she added. Sometimes, when that paid partnership goes particularly well, Deux will ask the influencer if they want to do a co-branded product. If that product comes to fruition, Deux and the influencer do a revenue share. Deux has done these types of collaborations with Lauryn Bosstick from The Skinny Confidential blog and podcast and Emma Chamberlain with Chamberlain Coffee—it just so happens that a lot of the influencers Deux partners with are also the founders of creator-led brands. View this post on Instagram A post shared by DEUX (@eatdeux) View this post on Instagram A post shared by DEUX (@eatdeux) Check out the latest Ad Age events and award programs Customers who end up purchasing a product due to these collaborations are “way stickier” than those who convert through something like a Facebook ad, Ladha said, adding that their repeat purchase rates are higher, too. Deux is perhaps most well-known for its marketing stunts. For instance, this past holiday season, the brand said that it accidentally put white sprinkles into some of its holiday cookie dough packages rather than red and green ones, so it ran a campaign offering a “holiday gift” to anyone who sent the brand a photo of the rare white-sprinkle jars of dough. What's happening here?Genuine mistake or multi-channel campaign to move inventory and generate UGC? pic.twitter.com/BgaMOGULdV— Grace Clarke (@graceclarke) November 14, 2023 Deux said that, in the case of the sprinkle giveaway, the idea stemmed from a genuine manufacturing mistake. “Those stunts really drive our content strategy,” Ladha said. “I would say our organic virality is usually from those stunts.” What the experts say Blake Droesch, a senior analyst for retail and e-commerce at Insider Intelligence, cautioned that Deux’s better-for-you positioning might only get it so far. He made a comparison to Halo Top, which soon faced competition from ice cream giants adopting its lower-calorie, high-protein formula, such as Breyers, which in 2017 unveiled its delights low- and reduced-fat ice creams. (Halo Top itself was absorbed by a giant in 2019 when Blue Bunny-owner Wells Enterprises bought it; Wells was later sold to candy giant Ferrero.) “You’re only going to be able to get so far on that model alone,” Droesch said, because there will still be “a large percentage of customers who aren’t interested in better-for-you alternatives and because the big CPG brands can so easily leverage their own resources to create competing better-for-you products.” However, if Deux continues to focus on its influencer strategy, Droesch said, it could have more success than previous better-for-you brands. “Better-for-you-desserts are certainly not new, but what is new are the ways that smaller brands can use things like influencer marketing and DTC channels to disrupt these established verticals,” he said. “That seems to be something that this company Deux is really leaning into,” he continued. While Halo Top “did not fully leverage” DTC channels and influencer marketing, Droesch said these channels “could potentially set up a brand like this for success.” What’s next Like many DTC brands, 2024 is set to be a major retail expansion year for Deux, which grew its distribution from 50 stores in 2021 to 1,200 stores in 2022, according to a brand spokesperson. In 2024, Deux estimates that it will be in more than 4,000 stores across its multiple product lines. “Our retail revenue is now bigger than our direct-to-consumer revenue,” Ladha said. There won’t be as many co-branded flavor collabs this year as the brand focuses on its retail expansion. Many of Deux’s 2024 influencer partnerships will likely have “some sort of retail tie,” she continued. Its donut holes are also rolling out nationally in Whole Foods stores in the coming weeks, and Sprouts is adding the line as well. Going forward, Ladha said Deux’s donut holes will be the brand’s “bright, shining product line.” Subscribe to Ad Age Sign up now for the latest industry news and analysis Click here

How Deux is challenging donut brands like Krispy Kreme and Entenmann’s

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