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Is the Gourmet Cupcake Dead? Retailers say no—or at least not yet

By Jazmine Woodberry

Once billed as “the favorite greedy treat of the me generation,” the gourmet cupcake has risen and fallen with the tide on a 10-year journey, where profits have often rocketed into the stratosphere before falling victim to economic woes. With gourmet cupcakeries now in shopping centers across the country and with cooking competitions popping up on television devoted entirely the tasty treats, it is safe to say the American market has experienced quite a love affair with these individualized desserts over the past decade.

Since Magnolia Bakery suddenly rose to national prominence after the company received a guest spot on “Sex And The City,” demand for gourmet cupcakes has risen. However, today, many are indicating a waning public interest in the novelty, pointing out the industry’s recently dipping profit margins. Crumbs, the only publicly traded small cupcake bakery, best exemplifies this trend, as it has taken a major hit, with its stock price dropping from more than $13 to less than $1.50 per share in just two years.

With the future of the commercial cupcake market in jeopardy, companies are diversifying their product offerings in an attempt to build a sustainable business plan moving forward.

For Vanilla Bean Unique Cookies and Cupcakes, cupcakes have become only part of the business model, albeit a part for which they still feel a demand.

“We still have a good demand,” said Debbie Smith, Vanilla Bean’s co-founder and Creative Chef. “Cupcakes have been around forever. But do I think that it’s going to last forever? My prediction is no, because I do think it’s just a trend.”

Debbie Smith and fellow Vanilla Bean co-founder Sandra Wharton first came together during culinary school. In a meeting of the minds, they realized that together they could form a company and started Vanilla Bean, LLC. Today, the company equates cupcakes with art, refusing to simply put fondant on a small cake and ship it out the door. The company is committed to producing the best products they can make.

Crumbs is following a similar path in maintaining their commitment to the gourmet cupcake while at the same time working to diversify its offerings and stay ahead of the curve. Through this strategy, Crumbs hopes it can beat what could be the steady decline of the gourmet cupcakery. In particular, Crumbs is seeking success by focusing on its lunchtime offerings, such as Burke and the Box gourmet sandwiches, offered through a partnership with heralded Chef David Burke.

“Consistent with our goal of complementing our already famous assortment of gourmet cupcakes with a choice of high quality and innovative lunchtime alternatives, we are thrilled that Chef Burke will be launching an assortment of gourmet sandwiches and salads for the ‘David Burke & Crumbs’ program,” said Julian R. Geiger, President and Chief Executive Officer at Crumbs Bake Shop, Inc., in a media release.

Today, many in the specialty baked goods industry are hard at work, attempting to predict what will be the “next cupcake.” One possible candidate is the “cronut,” a distinct cross between a croissant and a doughnut that has people talking. From the New York Times’ analysis of the evolution of the croissant to the Associated Press’ recent study of the cronut craze, this newly developed sweet treat is undoubtedly hot. The Dominique Ansel Bakery in SoHo, which offers cronuts, reportedly has lines for hours outside its shops and is taking pre-orders up to two weeks out.

From a commercial standpoint, the cronut has both perks and drawbacks. A positive, cronuts, unlike cupcakes, cannot be made at home. Thus, hungry dessert seekers will have to get their cronut fix by visiting a bakery. However, limited production, a short six-hour shelf life and a specific, perhaps limited target audience might limit the accessibility of the treat. In addition, those seeking gluten free and dairy free desserts are unable to get in on the crazy, as of yet, further limiting the consumer base for the product.

The team at The Invisible Chef, which sells all-natural baking mixes for cupcakes and various breakfast and bakery items, are trying to blend the bakery experience with the home environment by offering gourmet cupcake mixes for those budget-conscious bakers.

“I think selling mixes for cupcakes helps our consumer prepare ‘bakery worthy’ cupcakes at home, so they feel they are serving the same quality items they could purchase, but with their own twist,” said The Invisible Chef Owner Jill McCauley. “Consumers want to be gourmet savvy at home, and like being able to say they made the cupcakes themselves.”

As for the team at Vanilla Bean, it is the breadth of options the company provides, not just the company’s cupcake business, that is propelling them forward. In fact, it was Vanilla Bean’s cookies rather than its cupcakes that recently made an appearance in gift baskets at the most recent Emmy’s telecast.

“Our original goal was always cookies,” Smith said. “Cookies have been around forever and always will be.” As for the cupcake trend, Smith said she can not with certainty say the same thing.