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Cupcake Wars

Cupcake Bubble Continues to Inflate


Cupcake Wars

The Cupcake Bubble Continues to Inflate

Crumbs Bakery, NYC

You know when the cupcake wars are indicating a slowing of the trend when a relatively small Cupcakery receives a substantial capital infusion. The Great Cupcake Rush may be slowing down to a more reasonable rate of growth which also means that some cupcake bakeries may become statistics an no longer exist as real stores.

So what is a Cupcakery?

So what is a Cupcakery? Well, since it is so new, industry definitions are few and far between. They are specialty bakeries that focus on fabulous, extraordinarily different versions of the traditional cupcake. The cupcakes are many times larger than the traditional cupcake and are of course more expensive, ranging from $3 to $5 per cupcake. Mintel, a leading provider of consumer market research recently published " Mintel finds weddings in a recession have fewer bells, all the bliss. "…couples are trading in the elaborate wedding cake for individual cupcakes.." Cape Cod Lollicakes, featured in here recently in The Cupcake Wars , creates Wedding Cake creations with their bite sized morsels. More on why this may be happening. Last year Mintel predicted that nationwide cupcake sales are projected to rise approximately 20% over a five year period. This is an interesting counter trend to the consumers growing interest in healthier options and losing weight. Packaged Facts Fresh Baked Goods in the U.S ".. projects that the market will grow by 26% between 2009 and 2014, to reach $20.1 billion at retail." So all in all the market for these portable bits of heaven is still strong.

Crumbs - Expanding the Cupcake Wars

A Cupcackery getting much attention is Crumbs Bake Shop. Although they make traditional baked good, there website states they are most known for their "Signature" cupcakes. According to the site, "are not your average cupcakes… Signature Cupcakes are six (6) ounces, nearly double your supermarket size and tower close to four inches in height.".Needless to say they their pricepoint is reflective of this size at $4.50 each. But hey, how many of us order a Starbucks Latte or other special beverage that hovers at $5.

According to the article Cupcake Capitalism Offers Hope for New Bubble , by Jonathan Weil of Bloomberg, "Crumbs executives say they plan to expand to 200 locations within four years, a sixfold increase. They'll have no need for a traditional initial public offering, though. Crumbs plans to do a reverse merger with a publicly traded shell company called 57th Street General Acquisition Corp raising $54.6 million through its IPO however only a portion of that was invested into Crumbs. Jonathan wryly put is " All of which shows there's hope for the world's economy to return quickly to rapid growth, as long as we work together to figure out how we can get in all these new bubbles and sell at just the right time ".

I am glad he made that point since this type of financing, reverse mergers" is an arcane way of raising capital and are usually looked up skeptically. This is not a financial post so anyone who finds this interesting can do their own research. There is nothing inherently wrong with this vehicle but it is an indication that the financial community sees growth expansion in franchising that rides on the cupcake craze and the low cost of entry for a cupcakery franchise.

Going from 34 stores to 200 can almost certainly indicate franchising vs. corporate stores. My 35 years of retail food industry expertise has told me the cupcake boom was unsustainable Jonathan's article in Bloomberg and the type of financing, a reverse merger just reinforces my opinion.

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