Staying Aloft as the Cupcake Bubble Deflates

Thanks to plummeting stock prices, many experts are warning that Americans have had their fill of cupcakes. But some bakeries are thriving.

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Courtesy of SusieCakes

Despite warnings of a "cupcake bubble," Susan Sarich is looking to take her California-based bakery national.

Before there seemed to be a Magnolia Bakery-inspired cupcake shop on every corner – or cupcake-themed reality shows on cable – Susan Sarich noticed that there weren’t many places to buy made-from-scratch baked goods. “Most people were getting their cakes and cookies from grocery stores,” says Sarich, who was previously director of catering for the Clift Hotel in San Francisco. “They were looking at the labels and wondering why there were 65 ingredients when there should only be five.”

After spending more than a year developing a business plan and researching real estate in the Los Angeles area, Sarich and her partner, Houston Striggow, opened their first SusieCakes in Brentwood in 2006. The old-fashioned bakery was inspired by Sarich’s grandmothers, both avid bakers whose recipes for such goodies as Whoopie Pies and Vanilla Butter Cream frosting she inherited on 4×6 index cards.

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Today SusieCakes has eight locations in California and is working with a financial partner to expand into three to five more locations in the next 18 months. Sarich, who doesn’t franchise, says she plans to gradually build the brand nationally. “I see it becoming the neighborhood bakery in a lot of places,” she says.

It might seem like a sugar-coated view, given that many experts are warning that Americans have had their fill of cupcakes, both from local shops and national chains. In June 2011 Crumbs Bake Shop went public on the NASDAQ stock exchange under the ticker CRMB. After briefly trading for more than $13 a share, the stock crumbled into the low single digits. A couple of weeks ago the stock took another big dive after the company said sales this year would be 22% lower than projected, and was recently trading around $1.40 a share – less than the price of one of its mini cupcakes. The Wall Street Journal met the news with this headline: “Forget Gold, the Gourmet-Cupcake Market Is Crashing.”

SusieCakes does sell its share of cupcakes, but Sarich doesn’t worry about if and when the cupcake bubble bursts. “I have seen cupcake-only shops open and close,” she says. “When you only have one product there’s a higher risk when something trendy goes out of style.”

From the beginning, she says, she’s avoided gimmicks. SusieCakes stores give a nod to the 1950s, with stainless steel and seafoam green, but the look isn’t over-the-top retro. Each location has a dedicated head baker overseeing daily on-site baking – all of it visible to customers through a glass window into the kitchen.

The menu, meanwhile, stays constant and includes cake, cookies, pies, and, yes, cupcakes – but in fewer than a dozen flavors. “We keep it really simple,” she says. “I don’t go crazy and infuse everything with lavender.” In fact, the most popular items are chocolate cake with chocolate frosting or vanilla cake with vanilla frosting.

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Likewise, don’t expect to see gluten-free, sugar-free, or vegan items on the menu. “Look at In-N-Out Burger,” she adds. “They have shown that there’s value in doing what you do really well and not trying to be all things to all people.”

Nor does Sarich plan to ever stay up all night crafting functioning jackpots or wearable wedding dresses out of cupcakes – a recurring plot on TLC’s reality show “DC Cupcakes.” In fact, Sarich set up the business with the idea that she and her employees – there are now 155 of them – can work regular business hours and actually have a life.

As Sarich sees it, the cupcake trend may come and go, but her bakeries can count on one constant: The role of baked goods in celebrations, whether it’s pie on Thanksgiving, tiered cake at weddings, or cupcakes on birthdays. “Even when the economy turned down my sales were going up because people were still celebrating,” she says.

1 comments
ListentoJohnMar
ListentoJohnMar

I can't believe that this line of business is falling. c'mon who doesn't want these lovely sweet cupcakes. Well my wife does love cupcakes though It can adds to her body weight but I am sure she can burn that by reading a book that will sure help the cupcake business grow back. This book is laden with very good reviews from top business people. It is also laden with a lot of tips that can help the cupcake business! The book that I am talking about is THE 5-STAR BUSINESS NETWORKS by Vivek Sood! I've read it over at Goodreads and I am very much pleased with it.