Is The Cupcake Craze Coming to an End?

NEW YORKThe cupcake craze may have reached its peak with market sales decreasing. Dessert and bakery industries saw huge demand for the sweet treats in the early 2000s after the New York cupcake chain Magnolia Bakery was featured in the HBO series, Sex and the City, but the fad may be fading as demand flattens, according to a recent article in The Wall Street Journal.

At the peak of the cupcake craze, Crumbs Bake Shop, Inc., New York-based chain, appeared on the Nasdaq stock market under the ticker symbol CRMB with its cupcake specialties, featuring fillings like vanilla custard, caps of butter cream cheese and decorative flourishes, costing $4.50 each. After trading at more than $13 a share in mid-2011, the company decreased to $1.70 and dropped another 34% last Friday. The bakery recently stated it expects 2013 sales to reach about $57 million, a sharp decline compared to previous estimates of $73 million.

Crumbs partly blamed Hurricane Sandy for store closures with the company's earning report stating Sandy-related closures cost $700,000 in sales in the last quarter of 2012. However, some experts say the real problem is the gourmet-cupcake burnout.

Darren Tristano, executive vice president at the market research firm Technomic, said, "[the cupcake market] it's a short-term trend and we're starting to see real saturation. Demand is flat. And quite frankly, people can bake cupcakes."

Saturation of cupcake industry competitors, from individual bakeries and chains to grocery stores, may be contributing to decreases in sales. Cupcake sales also weakened for Crumbs' competitor, the Cupcake Salon in Jersey City, N.J. Owner Cynthia Hankerson stated that just a year ago, Saturday cupcake sales would average $600 to $700, but today the company is lucky to bring in $300.

However, not all bakeries in the competitive industry are seeing declines. Magnolia Bakery, with seven stores in urban areas of North America and four overseas, remains consistently profitable. "Sales are up over the last year," said company spokesperson Sara Gramling, adding that less than half of sales at the company are cupcakes, which cost $3.50 each, the remainder are from desserts like cheesecakes, pies and pudding.

Crumbs may have grew too fast into suburban markets that couldn't support the brand, suggested John Gordon, principal at Pacific Management Consulting Group, restaurant-industry analysis firm. "There are only 15 to 20 metro areas in the country where it would work," he told The Wall Street Journal of the gourmet concept. "There is only so large of a market."