Molly’s. More. Sweet Mandy B’s. Chicagoans may recognize these names as local eateries specializing in the most convenient of small pastries: the cupcake. Though recipes for these treats have been around for hundreds of years, and are a major staple at birthday parties and big celebrations, it was not until the early 2000s when the country started to develop a demand for gourmet cupcakes. You can thank the TV series Sex and the City (of all places!) for that; with the show prominently featuring the popular Magnolia’s cupcake shop, the nation went cupcake crazy. Today, hundreds of gourmet cupcake shops thrive in our city and throughout the country, rallying behind its industry’s largest leader, a New York-based publicly traded company called Crumbs Bake Shop. With mouth-watering flavors ranging from red velvet to cookie dough, you would think this market would continue to thrive off of our taste buds.
Unfortunately, that may not be the case anymore.
At the peak of its success, Crumbs launched their initial public offering in June 2011 with a strong $13 per share. This past month in mid-April, though, its shares have sunk to $1.70, and they continue to fall at a disquieting rate. Because of this, the company adjusted their 2013 sales forecast from an initial $73 million to an unsettling $57 million. The declining performance of such a huge company as Crumbs has caused some analysts to claim that the market for gourmet cupcakes is beginning to collapse. A recent Wall Street Journal article poses the question, “Is the cupcake bubble that inflated relentlessly over the last decade finally about to burst?”
There are many factors that could have caused this impending cupcake recession. Probably the most apparent of these is the oversaturation of the market. Since the trend began, cupcake making became one of the prime choices for young entrepreneurs to kick-start their small business ventures. This has obviously led to increased competition and a staggering number of locations selling the same product; in Chicago alone, there are nearly three hundred different gourmet cupcake shops. But even these specialty stores have to compete with other establishments like grocery store chains, which are trying to attract the same market with their own cupcake concoctions. With all of this competition, the lines of differentiation start to blur, and it leaves consumers wanting a change of pace.
This change of pace is an additional factor contributing to the cupcake’s demise: consumers are growing tired of the fluffy delicacies and want to indulge in something new. The aforementioned Wall Street Journal article attempted to scour Twitter for the next big tasty treat. Responses differed from gourmet ice cream to mini-pies, but the uncertainty itself is pretty clear. Cupcakes are no longer king, and many successful cupcake shops are starting to feel it in their wallets… and their stomachs.
What do you think is the next big trend in the pastry/delicacy market? Do you think the “cupcake economy” will bounce back, or is it all heading down south from here?