Cupcakes 6 Feet Under? Thank Goodness!

Wednesday, April 24, 2013
Posted in category Boom-Bubble Phenomenon

I have written often on the silliness of the whole cupcake craze that has swept America in recent years. My earliest cupcake-bashing post goes back to 2009.

Finally, folks are declaring that the cupcake craze was indeed a bubble and it was indeed ludicrous. Yahoo writes, “More Evidence That the Gourmet Cupcake Bubble Has Popped.” Forbes writes, “RIP Cupcakes, Long Live Juice Cleanses? Inside the Fickle Food Trend Bubble.” An NPR story asks, “Has the Cupcake Bubble Finally Popped?” And finally, the Wall Street Journal wrote, “Forget Gold, the Gourmet-Cupcake Market is Crashing.”

In January 2011, I wrote about the announcement that Crumbs Bake Shop was going public via a $66M merger. I mentioned that the stock was a terrific target for a short sell. I was then attacked by cupcake-loving readers who were upset that I would cast aspersions on an industry that was representative of the free market, free choice, and non-coercion. However, there’s a major distinction between (1) criticizing a trend or fad for its underlying cultural-financial inanities and (2) calling for government intervention to coerce peaceful people during the course of their voluntary transactions. I never did the latter, so why all of the outrage? The stock for Crumbs Bake Shop nows sits at just above $1/share.

I said the trend wasn’t based on real wealth, but instead, the inane obsession with cupcakes was born out of credit expansion and artifically low interest rates. The cupcake craze has been a great example of malinvestment - too many people with too much credit spending too much money building up and/or expanding businesses based in faddish fixations that appeared, to them, to be prime investments. Thus small cupcake bakeries became booming businesses with hordes of consumers trying to become a part of the latest trend that was made popular by such cultural icons as “Sex in the City.” Cupcakes became the “hot” item for all of the wannabee consumers who had a need to fit in with the latest cultural rage. Therefore, the $5 cupcake became a statement of fashion. As Joe Queenan once wrote, America has had a “fawning subservience to the cupcake.”

However, the one thing all the media stories are missing on this issue is that this cupcake craze was one of many puerile trends that came about as a result of cultural changes spurred on by the boom-bubble-bust economic period. Dumbed-down, adult America became infatuated with cupcakes. The more outlandish and childish, the better. And then, stimulus policies, along with the Federal Reserve’s fight to keep credit cheap and money plentiful, kept skewing the market and distorting time preferences, making even the ridiculous seem profitable and real. Adults developed a strange obsession with enormous, sugar-laden, pricey mounds of sweets all dressed up in toppings and flavors suitable for the most discriminating 5-year-olds.

And now, the cupcake investors are the latest laughingstock of the financial world. Seeking Alpha put together a fantastic financial obituary of Crumbs Bake Shop for your reading pleasure. Except when challenged with the question, “What went wrong,” the author notes:

Based on the pricing, Crumbs has no reason not to be successful. Following a sampling of several cupcake stores in the Washington, DC area, Crumbs cupcakes appear to be the least expensive, and the shareable “signature size” cupcakes offer very good value. Reviews on Yelp seem relatively good, and the cupcakes are tasty (in my opinion, at least). Perhaps cupcakes have just been a fad and is now in secular decline? I have little hard evidence for or against this, but let’s take a look at the Google search trends for Crumbs and its two most famous competitors: Sprinkles and Georgetown Cupcakes.

The cupcake boom-bust has little to do with pricing strategies, perceived value, Yelp reviews, taste, or pure fads. These people who address these market quirks just don’t understand basic economics, including business cycles and economic intervention on the part of government and it’s monetary-banking sector.

With all things considered, the cupcake novelty has worn off, so get over it people. Thanks to the many wonderful readers who sent me these articles.

 

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4 Responses to Cupcakes 6 Feet Under? Thank Goodness!

  1. George says:

    April 25th, 2013 at 7:52 am

    Apparently the NYC contribution to this, Baked by Melissa, is still in existence.  Melissa was clever enough to charge for samples by only selling sample sized cupcakes, which made great sense since after sampling a 100% sugar and food coloring cupcake you did not want any more.   

    WHAT NON-CUPCAKE-BASED BUSINESSES CAN LEARN FROM BAKED BY MELISSA
    http://www.fastcompany.com/3007588/takeaway/what-non-cupcake-based-businesses-can-learn-baked-melissa

  2. Steve `Poots' Candidus says:

    May 2nd, 2013 at 6:33 pm

    Karen,

    Although I always liked cupcakes as a kid – there was a wonderful old German bakery down the street from where I grew up in Baldwin, NY called `Marx Bakery’ that made great cupcakes – I am more of a `Muffin Man’ myself…

    http://www.youtube.com/watch?v=ptoN-5QE0Lw

    Poots

  3. JQ says:

    May 10th, 2013 at 12:25 am

    Cupcakes, home baked breads/cookies/pies went the way of the dinosaur starting in the 60′s when women decided that having a second car, more material things, fast crap food, and no time for self or family was more important. All these cravings now for things like cupcakes, comfort foods, et al, are merely a symptom of a great yearning for what used to be and is no longer. I feel for kids today with moms working outside the home—almost cried over reading how this one young boy came home from school and everyday made a pickle sandwich..egads, now that is truly sad. I often wonder when the hell women are going to wake up and realize they’ve been put on the govt train to nowhere. The repubs wanted women to work so that they would have more money for their stinking wars. The Dems want women to work so that no one is watching what their kids are being taught in crap schools. Further the dems do war on their own citizenry via higher and more taxation, thus making mom’s job outside the house something of a joke. Take a woman making 35,000….take out the 11,000 of taxes..another 4,000 for that second car/payments and gas/upkeep/insurance…more salon visits along with a career wardrobe good for at least another 2,000. Mom is exhausted after 8 hrs on the job and another 2 on the road, so fast food also revs up what she spends on food..add this to more meals eaten out with the family which adds another 3,000. If kids are still in daycare, she could spend up to 6,000 a year…
    all in all, we are looking at an outlay of 26,000…out of 35,000. And she may have to add to health insurance in addition. That so called profit of $9,000 yields all of $4.50 an hour. That is why I can say, when will women wake up? Is it really worth sacrificing the best things like being there for your kids when they get home? or not having decent healthy, nutritous meals, or never having a minute to yourself for self improvement, or reading a book or taking a course or working on a talent..or plain old exercise to keep in shape. Yes, I know I sound like a fifty’s mom..but I also got to exercise my brain much more than any gal working outside the house..and the kids are doing fabulous as well. I have no regrets for not climing any corporate ladder, but most of all, I am thrilled that uncle sam didn’t get to leech off my efforts…and gals who fork over 1/3 of their earnings are aiding/abetting all those crooks who keep their statist gov’t power 24/7. Worse, yet is any monies you have put into your 401k, is already being viewed as another pot they can tap!

  4. JQ says:

    May 10th, 2013 at 12:33 am

    Cupcakes, home baked breads/cookies/pies went the way of the dinosaur starting in the 60′s when women decided that having a second car, more material things, fast crap food, and no time for self or family was more important. All these cravings now for the aforesaid is a symptom of a great yearning for what used to be and is no longer. I feel for kids today with moms working outside the home—almost cried over reading how this one young boy came home from school and everyday made a pickle sandwich..egads, now that is truly sad. I often wonder when women are going to wake up and realize they’ve been put on the govt train to nowhere. The repubs wanted women to work so that they would have more money for their stinking wars. The Dems want women to work so that no one is watching what their kids are being taught in crap schools. Further the dems do war on their own citizenry via higher taxation, thus making mom’s job outside the house something of a joke. Take a woman making 35,000….take out the 11,000 of taxes..and
    4,000 for second car/pymnts/gas/upkeep/insurance
    Add more salon visits along with a career wardrobe good for at least another 2,000. Mom is exhausted after 8 hrs on the job and another 2 on the road, so fast food also revs up what she spends on food..add this to more meals eaten out with the family which adds another 3,000. If kids are still in daycare, she could spend up to 6,000 a year…
    all in all, we are looking at an outlay of 26,000…out of 35,000. And she may have to add to health insurance in addition. That so called profit of $9,000 yields all of $4.50 an hour. That is why I can say, when will women wake up? Is it really worth sacrificing the best things like being there for your kids when they get home? or not having decent healthy, nutritous meals, or never having a minute to yourself for self improvement, or reading a book or taking a course or working on a talent..or plain old exercise to keep in shape. Yes, I know I sound like a fifty’s mom..but I also got to exercise my brain much more than any gal working outside the house..and the kids are doing fabulous as well. I have no regrets for not climbing any corporate ladder, but most of all, I am thrilled that uncle sam didn’t get to leech off my efforts…and gals who fork over 1/3 of their earnings are aiding/abetting all those crooks who keep their statist gov’t power 24/7. Worse yet, is any monies you have put into your 401k, is already being viewed as another pot they can tap!

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