Is the Cupcake Industry Crumbling?

The U.S. looks like it needs a cupcake. A report released by the Labor Department Thursday shows that U.S. consumer prices fell 0.4 percent in April, a larger decline than a MarketWatch poll predicted.

The tiny cake craze started showing declines in April, when Crumbs Bake Shop (NASDAQ:CRMB) stock price hit a new low of $1.29 a share after hitting a high of more than $13 a share in 2011. The Wall Street Journal adds to this desolation, as it reported in April that Crumbs was warning its new expected 2013 sales to only reach about $57 million, rather than the previous estimate of $73 million.

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While the company cites different reasons for store closures, including Hurricane Sandy, others claim that the cupcake novelty has simply worn off. Darren Tristano, executive vice president at Technomic Inc., a Chicago research and consulting firm that specializes in the food industry, explains, “These are singularly focused concepts … You’re not going to Crumbs every day. It’s a short-term trend and we’re starting to see a real saturation. Demand is flat.”

It seems as though the inundation of Crumbs Bake Shops, along with a host of competitors that have moved into the market and across the nation, have led to a national cupcake overdose. Although food prices were up 0.2 percent in April, the opposite could be said for cupcakes, whose index declined 0.8 percent from the previous year and from the previous month.

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