People tried to eat healthier. Instead, doughnut sales went up

The doughnut business is resilient. More than a year ago, doughnut makers began to notice their breakfast business dip. Also, people began to realize that starting your day with a hunk of sugary, fried dough (often covered in chocolate) wasn't healthy.

Investors shied away from bakers and hopped on with healthier snack companies like the makers of energy bars and trail mixes. Now they're slowly crawling back to doughnuts. It seems even investors get cravings.

Doughnut sales from quick service restaurants, like Krispy Kreme and Dunkin' Donuts, are up for the third straight year, after several years in decline, according to data from NDP CREST, a New York-based market research firm.

And this week, doughnut giant Krispy Kreme reported a 9 percent increase in earnings in its first-quarter earnings report, beating its own internal estimates. Revenue was up more than 37 percent from the first quarter a year ago.

Kripsy Kreme's shares jumped 12 percent Thursday morning, erasing all of its losses for the year.

While the rest of the food industry is racing to appear more healthy — Subway, McDonald's, Taco Bell and Pizza Hut have all said they would eliminate man-made additives in some of their popular food — doughnut makers have found renewed success with more decadent flavors. One shop in St. Louis (aptly named "Strange Donuts") serves one covered in caviar.

Of course, Americans' relationship with doughnuts has changed, industry observers say, primarily because doughnuts are no longer seen as a breakfast food.

"This is not a breakfast business," said Will Slabaugh, managing director at financial services firm Stephens. "This is much more of treat business than a breakfast business."

Even more, they're cheap treats. Taking your kids for a doughnut on a Saturday morning or bringing in a dozen for work pals won't break the bank. So no matter what goes on in the economy, as long as you have a decent (read: delicious) doughnut, people tend to buy them.

But the generic "treat" isn't enough anymore to win in today's doughnut shop. Try coating a doughnut in maple syrup and bacon. Astro Doughnuts and Fried Chicken in Washington, D.C., has grown famous for its fried chicken, you guessed it, inside a doughnut.

Dunkin' Donuts, which includes Dunkin' Donuts and Baskin-Robbins, has transitioned its profits away from doughnuts themselves. It makes 57 percent of its profits off coffee sales and another sizable chunk off breakfast sandwiches.

Krispy Kreme, which makes 88 percent of its money off doughnuts, this quarter launched a line of three frozen lattes because they help profit margins and ease the company into more regular coffee sales. If you think margins on doughnuts are good, you should see them on coffee grounds and K cups.