Cupcake Craze Crumbling

The tiny cakes are trending downward, with consumers looking elsewhere to satisfy their sweet tooth.

April 18, 2013

NEW YORK – The gourmet cupcake craze, with its proliferation of boutique shops across the country selling $5 cakes, is losing its appeal with consumers, the Wall Street Journal reports.

The craze hit its apex in June 2011, when New York-based Crumbs Bake Shop Inc. went public, trading on the Nasdaq market for $13 a share. Today, shares have plunged to $1.70, with sales down 22% from earlier projections.

"The novelty has worn off," explained Kevin Burke, managing partner of Trinity Capital LLC, a Los Angeles investment-banking firm that often works in the restaurant industry. 

"These are singularly focused concepts," said Darren Tristano, executive vice president at Technomic Inc., a Chicago research and consulting firm that specializes in the food industry. "You're not going to Crumbs every day. It's a short-term trend and we're starting to see a real saturation…Demand is flat.”

Crumbs is one of the largest companies in the gourmet-cupcake industry, with stores in 10 states and the District of Columbia. 

The cupcake business has a relatively low barrier to entry and the field has seen an inundation of competitors, including individual bakeries, chains and grocery stores.

Crumbs rivals include the Cupcake Salon in Jersey City, whose owner, Cynthia Hankerson, said sales are slipping. She said she fears the cupcake fad may be waning.

She said a typical Saturday last year would generate up to $700 in sales, while today  "we're lucky if we get $300," she said. "People get tired of things.”

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