Crumbs Bakery Chain Closes Up Shop

July 21, 2014

When Crumbs, the New York City-based chain that built its business around cupcakes, shuttered several dozen of its remaining locations on Monday, it seemed like an abrupt ending for a company that opened a decade ago to ride the wave of popularity of the sugary treat sparked by the TV series Sex and The City.

But Crumbs’ rise and fall isn’t surprising when considering the company’s dependence on a fad. In fact, it’s the latest cautionary tale for one-item restaurants and other chains that devote their entire menus to variations of a single product.

– Krispy Kreme, for instance, expanded rapidly in large part on the cult-like following of its doughnuts. But sales started declining and the company ended up closing locations. Last year, restaurant industry researcher Technomic said Krispy Kreme had 249 locations, down from 338 a decade ago. The chain has broadened its menu more recently.

– A similar fate befell Mrs. Fields, which is known for its cookies. The chain has suffered in part because of the ubiquity of places that sell cookies, and it was down to 230 stores last year, from 438 a decade ago.

– TCBY had 355 stores last year, down from 1,413 a decade ago. Part of the chain’s problem is the competition, given the proliferation of frozen yogurt places.

Companies that only offer one item can fall victim to a number of risks. For one, trendy products tend to attract competition from big and small players that want to jump on the bandwagon. For instance, Starbucks and Cold Stone Creamery have been trying to capitalize on the cupcake trend with cake pops and ice cream cupcakes, respectively.

Being beholden to a single item also makes companies more susceptible to customers’ whims and changing tastes. There’s always a new fad. Frozen yogurt. Chopped salads. Freshly squeezed juices. Entrepreneurs may be eager to open stores selling these products, but there’s always the danger that fickle customers will move on to the next thing.

“A cupcake shop today can’t survive on just cupcakes,” said Darren Tristano, a Technomic analyst.

To combat the risks, many chains diversify their menus. And several have prospered by moving beyond their flagship products.

Dunkin’ Donuts, for instance, has been pushing aggressively into specialty drinks and sandwiches, with a focus on boosting sales after its morning rush hour. And Starbucks has introduced a range of new foods and drinks in its cafes, including premium bottled juices and salad boxes. The coffee chain even plans to expand wine and beer offering in evenings to as many as 1,000 locations over the next several years.

Magnolia, another popular New York City cupcake shop, is credited for sparking the cupcake craze after it was featured in Sex and the City.

The chain, which opened in 1996, has endured while many of the cupcake shops that opened up in its wake – including Crumbs – focused on just cupcakes. That’s in part because Magnolia, which now has 7 locations, offers a variety of desserts, including cakes, pies, cookies, brownies and banana pudding.

Sara Gramling, Magnolia’s spokeswoman, said the company is learning about the dangers of focusing too heavily on one product, as well as expanding too quickly.

“We’ll be mindful of those lessons,” she said.

Still, some chains manage to persevere by carving out a niche where there aren’t many competitors; Auntie Anne’s and Cinnabon have expanded locations over the years.

As for Crumbs, the company noted in a statement late Monday that it was evaluating its “limited remaining options.” That will include a Chapter 7 bankruptcy filing.

How Does the Cupcake CRUMB-le

July 9, 2014

pictureWas anyone surprised by the recent demise of the Crumbs Bake Shop? For those who read the Wall Street Journal article about the gourmet-cupcake crash in April 2013, or those that had invested in the publicly traded company, it should not have been unexpected.

Last April, it was clear that the “cupcake fad” was crumbling right at the time Crumbs Bake Shop was expanding locations and working hard to be the category leader in the high-growth cupcake snack segment.

So what went wrong?

With Crumbs following in the footsteps of high-flying brands like Mrs. Fields, TCBY, Cold Stone Creamery and Krispy Kreme, consumers have proven that they are very fickle about where they shop for indulgence. As more independent and regional chains of cupcakeries grew nationally, the strong demand and growth provided short-term evidence that the trend was hot and would continue. But supermarkets jumped in with significantly lower price points, and consumers began baking cupcakes at home for even less. Kids’ lemonade stands across America began offering cupcakes for 50 cents, and the obsession with this traditional classic fell flat.

Brands that rely on a narrowly focused product will have greater risk. Although In-N-Out Burger has fewer than 10 items including burgers, fries, soda and shakes, it continues to do well by expanding slowly and cautiously and staying in tune with its customer. Overall, a bakery positioning with a broader offering and strong beverage platform could have strengthened the Crumbs business model with a bigger play at lunch to complement their breakfast and snacking occasions.

How have other brands fared with more narrowly focused offerings?

Mrs. Fields brought fresh baked cookies to America and by 1993 had nearly 600 stores open in malls around the country. At a time when malls were very popular, many consumers couldn’t get enough of those chocolate chip cookies. Today, there are less than 230 locations open and some have paired up with frozen yogurt brand TCBY to provide more variety in the co-branded location.

TCBY was the original leader in fro-yo until gourmet ice cream stole the show, forcing many stores to close. TCBY peaked in 1997 with more than 2,800 locations in the U.S. Americans’ willingness to pay more for what they considered “better ice cream” was evident as many brands emerged in the premium ice cream category including Ben & Jerry’s, Cold Stone Creamery, Marble Slab and Maggie Moo’s.

Krispy Kreme’s exceptionally craveable glazed donuts became President Clinton’s favorite and soon worked their way into regular consumption across the country. Peaking in 2004 with nearly 400 units, the donut company had sales in the U.S. of over $1 billion. Then came Atkins and low-carb diet trend. Krispy Kreme’s narrow focus on donuts paired with aggressive expansion put it at risk and caused it to shutter nearly half its restaurants by 2010. Today, Krispy Kreme has continued to expand globally and has started to open new stores in the U.S., posting a year-end 2013 total unit count of 249.

Cold Stone Creamery captured the hearts and wallets of many American consumers by introducing gourmet ice cream, customized on a cold slab with mix-ins. Although the chain continues to provide frozen desserts to many Americans, it does so with far fewer locations since its peak in 2007 at around 1,400 locations. Cold Stone Creamery ended 2013 with 990 stores in the U.S.

So what are the early warning signs for when a brand or category may be at risk?

Early warning signs appear as the category becomes more competitive. Category leaders begin to slow unit expansion, and same-store sales level out. As many brand leaders push expansion nationally, they begin to see greater competition from regional chains and independents that are in tune with the local consumer base. As more regional chains expand nationally and begin to battle for share in larger markets, new locations result in cannibalization and often consumers trying new brands just to see if they are different.

Strong blocking and tackling efforts are necessary to maintain differentiation and loyalty. Customers can be easily lost if franchise and company stores don’t deliver high levels of service and quality standards.

When does a segment become mature?

Many up-and-coming categories show high growth in unit expansion that drives sales volume growth. When longer-term sales growth shifts from high growth (above 5 percent) to lower growth (below 5 percent) you can usually see that the consumer interest is plateauing or that supply has caught up with demand.

In some cases, older legacy brands may be on the decline, offsetting growth from more contemporary concepts. Or menu-category products have been introduced into other segments, such as flatbread pizza in casual dining competing with limited-service pizza or more seafood options in the steakhouse segment competing with seafood-focused restaurants. In any event, declining growth rates generally show the state of the category and where it is headed.

Which segment is hot today but at risk in the short-term?

Juice concepts appear to be all the rage today. With health and wellness getting more play from affluent and Millennial consumers, it’s clear the cold-pressed juice concepts will be pushing hard to expand. Even though these concepts have price points over $10 in major markets like Los Angeles and New York, it’s clear that Hollywood starlet impact on our country with juice cleanses is evident. Juice specialists will likely expand quickly as the fad continues but the trend will settle into concepts that represent reasonable prices for the mainstream consumer.

Expect major brands like Starbucks’ Evolution Juice and Juice It Up to have a leg up on the competition, but ultimately, the “craze” will settle down and many restaurants will likely see declines in sales that make it difficult to continue their operations.

For cutting edge trend research and results, always keep Technomic in mind!

Let Them Eat Cupcakes

January 31, 2012

Let Them Eat

Let them eat cupcakes: Trend hits the region in a big way

Vanilla to red velvet, mini to jumbo — the cupcake craze is going strong in the Mohawk Valley, and for some, baking means big business.

Nationwide, cupcakes have been a hot item. Between 2006 and 2010, cupcake sales increased between 9 and 13 percent each year, according to the Perishables Group, a Chicago-based fresh food consulting firm.

“Cupcakes are thriving because they meet many current consumer hot buttons — indulgence, single-serve and convenience,” said Perishables Group spokeswoman Kelli Beckel. “They make cake an everyday eating occasion and allow shoppers to try new flavors.”

Locally, the confection has not only given rise to new specialty shops but also has increased the sales of established businesses.

Saving time and dough

The emergence of cupcakes began in 2008, around the time the economy started to struggle, said Darren Tristano, executive vice president of Technomic, a food-industry consulting and research firm.

Sweet desserts are similar to alcohol in that sales tend to increase with difficult financial times, he said.

“It’s still an affordable luxury,” Tristano said.

In spite of a struggling economy, specialty stores continue to open.

Candies N Cupcakes on North Madison Street in Rome, owned by Liz Davis opened Halloween weekend and had its grand opening the first weekend of December.

Davis, 26, was working out of her home for two to three years, selling cupcakes at farmers markets and for special events, she said.

It wasn’t until she was approached by Rome Mayor James Brown that she thought about opening a retail location, Davis said.

The city’s small business program and a matching loan from the Small Business Administration helped to make her store a reality, Davis said.

“People are purchasing them for weddings, baby showers, birthday parties and holiday parties,” she said.

Davis said she already has several weddings scheduled for this summer.

Cupcakes here to stay

Celebrating its 56th year in business, Holland Farms in Yorkville always has sold cupcakes, but they were made to order, said co-owner Marolyn Wilson.

“Now, we’re putting them out every day,” she said. “We’re probably making four or five times more than we’ve ever made before.”

The trend started ramping up several years ago, Wilson said, but it didn’t hit the Mohawk Valley right away. There is no denying the popularity now.

Wilson said this year the bakery will dub January “Cupcake Month.”

The hand-held dessert is not just for kids anymore, with more exotic and adult flavors such as pina colada and mocha chocolate, Wilson said.

“People can take one home and feel as if they are really giving themselves a treat instead of having to buy a whole cake,” she said.

In many areas of the country, specifically in larger cities, the cupcake market has reached saturation, Tristano said, while other areas will continue to see the trend grow.

Mintel Group, a marketing research firm, also expects the fad to continue.

“I would anticipate we will see the cupcake trend continue to develop, with perhaps more options that are better for you … with products that are customizable and with continued flavor variations,” said Jennifer Ballard, public relations coordinator for Mintel.

Locally, independent stores might continue to crop up.

Sugar Babes Cupcakes, owned by Kelli Grimaldi-Vance and Terri Puleo-Donato, is expected to open on Genesee Street in New Hartford in January.

“It started out through a discussion over a glass of wine where we said, ‘Let’s do cupcakes,’” Puleo-Donato said. “The next week we baked for a friend and it just grew from there.”

The largest growth for the business has been in catering for corporate events, she said.

Sugar Babes has been operating by renting local kitchens, but after an entire year and increasing demand, they will open a storefront.

“We’re very excited because we know there’s definitely a need for it,” Puleo-Donato said. “It’s a fun food. It makes people smile.”

View the full article on Observer Dispatch

Yuba City Cupcake Shop Crashes in on Trend

January 23, 2012

Yuba City

Yuba City cupcake shop cashes in on trend

Yuba City, meet your first cupcake shop.

Tami Davis, 53, and her daughter, Laurie Porter, 32, teamed up last month to open Yuba City’s first gourmet cupcake shop, Cupcake Magic, last month.

Davis and Porter sell 12-14 flavors a day at their Plumas Street store. Staples include red velvet and raspberry-filled chocolate. Seasonal flavors include pumpkin ginger, gingerbread cupcake topped with a Zinfandel butter cream frosting and a candy cane cupcake slathered with vanilla frosting and candy cane shards.

“People get excited over cupcakes,” Davis said.

Cupcakes have been all the rage all over. They’ve been featured on multiple TV shows, sold on food trucks and featured in cupcake blogs. Grocery stores are selling more and more of them each year and shops have popped up all over the Central Valley the last few years.

Other Yuba City stores have hocked them, including The Cookie Tree and Cakes by Nancy, but Cupcake Magic is the first cupcake-centered shop.

Davis and Porter are trying to catch a wave that started in larger cities.

Cupcakes are selling like hot cakes across the country. Over the last five years, cupcake sales increased between 9 and 13 percent each year, according to the Perishables Group, a Chicago-based fresh food consulting firm.

Porter, at least initially, raised an eyebrow. She knew cupcakes were the new “it” thing, but feared they’d missed the boat.

Her mother disagreed. Cupcakes might be passé in New York, but people in the Yuba-Sutter area would eat it up.

“We’re right on cue for Yuba City,” Davis said.

“Cupcakes are thriving because they meet many current consumer hot buttons — indulgence, single-serve and convenience,” said Kelli Beckel with Perishables Group.

Cupcakes are “old news” in cities like New York and Los Angeles, where the trend started five or six years ago. Now, they’re trickling down to rural areas. “They’re just hitting the smaller cities,” Beckel said.

Cupcakes aren’t new, but paying $3 to $5 for one is, said Darren Tristano, executive vice president with Technomic, a food industry research firm. Eaters are redefining what they’re willing to pay for them, like they did when Starbucks created new expectations about coffee. People then started shelling out $5 for a grande mocha frappuccino.

All of a sudden, cupcakes weren’t something you made in bulk at home or even bought by the dozen. It was something special, a treat.

“It really became a nice, affordable indulgence,” Tristano said.

Cupcakes have weathered the economy well because they are an affordable luxury, he said and eaters don’t have to buy a whole cake to enjoy something sweet and unnecessary.

After the New Year arrives, Davis and Porter plan to unveil their new creation, a Guinness cupcake slathered with Bailey’s Irish Cream frosting.

View the full article on Appeal-Democrat