Just Desserts? The Gourmet Cupcake Business Starts To Crumble
Would you pay $5 for a cupcake? People had been clamoring to gourmet cupcake stores over the last few years, but now it seems the appeal has worn thin for the high-priced baked goods.
According to the The Wall Street Journal, “The craze hit a high mark in June 2011, when Crumbs Bake Shop Inc., a New York-based chain, debuted on the Nasdaq Stock Market under the ticker symbol CRMB.” The shop had become popular for it tasty concoctions—4″ tall cupcakes, with fillings such as vanilla custard and caps of butter cream cheese. (If you’ve ever had one, you know it’s an experience.) Even though some the prices reached $4.50 each, the cupcakes were flying off the shelves. They also sell $42 “colossal” cupcakes that serve six to eight people.
When the company went public, the stocks were trading at more than $13 a share in mid-2011. But now Crumbs has dropped to prices as low as $1.70. It dropped 34% last Friday after Crumbs announced that sales for the year would be down by 22% from earlier projections.
“The novelty has worn off,” Kevin Burke, managing partner of Trinity Capital LLC, a Los Angeles investment banking firm that often works in the restaurant industry, told WSJ.
Crumbs grew fast. In 2003, husband-and-wife entrepreneurs Jason and Mia Bauer opened the first Crumbs bakery in 2003 on Manhattan’s Upper West Side. Now it has 67 locations in 10 states and the District of Columbia, almost double the number it had less than two years ago.
“It’s a short-term trend and we’re starting to see a real saturation,” Darren Tristano, executive vice president at Technomic Inc., a Chicago research and consulting firm that specializes in the food industry told the newspaper. “Demand is flat. And quite frankly, people can bake cupcakes.”
Even smaller companies say they’re seeing their cupcake sales decline. Cynthia Hankerson, owner of the three-year-old Cupcake Salon in Jersey City, N.J., told the newspaper her sales are slipping and that she suspects the cupcake fad may be waning.
Gourmet cupcakes became a thing after New York cupcake chain Magnolia Bakery was featured on Sex and the City. Unlike Crumbs however, Magnolia, which has seven stores in North America and four overseas, has remained consistently profitable. Their sales are up over last year.
Instead of an end to the gourmet cupcake, there could be another reason Crumbs is failing. John Gordon, principal at Pacific Management Consulting Group, a restaurant-industry analysis firm, suggested to WSJ that perhaps Crumbs grew too fast into suburban markets that couldn’t support the brand.
Are you still chowing down on cupcakes? Or have you moved on to other treats?