The Cupcake Bubble

In recent years, the response to a popped economic bubble has been to create a new one. The pierced dot-com/telecommunications bubble paved the way for the housing/credit bubble. That punctured bubble may be giving way to an alternative energy bubble. But I've got my eyes on a smaller, but no less revealing, one: the Cupcake Bubble.

 

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The current recession, which started in late 2007, laid the groundwork for the recent proliferation of cupcake stores in American cities. Lots of people know how to make really tasty cupcakes, which are simple products with cheap basic ingredients. Baking cupcakes doesn't require a large amount of capital investment, and it's relatively easy to scale up without hiring lots of workers. It takes about as much labor to produce three dozen cupcakes as it does to make one dozen. Meanwhile, storefronts in heavily trafficked areas became cheaper with the decimation of local retail. And so in the past year, casual baking has turned into an urban industry.

The trend started, as most trends do, in Los Angeles and New York. In Los Angeles, Sprinkles, which bills itself as the first cupcake bakery, has expanded from its base in Beverly Hills to five locations in California, Texas, and Arizona—with 16 more outlets in the works. Crumbs, started six years ago on Manhattan's Upper West Side, is up to nearly two dozen locations: five in Los Angeles, and 18 in chi-chi zones of the New York metro area—New Canaan, Conn.; Westfield, N.J.; East Hampton, N.Y.—with three more on the way. Magnolia Bakery, immortalized in Sex and the City, has three locations in Manhattan. Washington, D.C., is getting in on the act, too. As the Washington Post notes, "at least half a dozen cupcake bakeries have opened around Washington in the past 20 months, and more are on the way," with Georgetown Cupcake and Red Velvet out front.

The cupcakeries are succeeding for a few reasons. They're peddling a product that is simple, obvious, and generally affordable. Most of the new joints charge about $3 for a cupcake. And they're certainly a useful rebuke to Starbucks, whose industrialized baked goods are barely edible. (I suspect that the coffee chain's practice of placing sausage and egg muffins in the glass cases and letting them sit there all day must depress sales of the adjacent muffins and scones.) And yet I'm suspicious of the cupcake trend for historical, financial, and, ultimately, gastronomic reasons.

In America, bubbles form because any good business idea gets funded a dozen times over. That's the American way. Cupcakes are now showing every sign of going through the bubble cycle. The first-movers get buzz and revenues, gain critical mass, and start to expand rapidly. This inspires less-well-capitalized second- and third-movers, who believe there's room enough for them, and encourages established firms in a related industry to jump in. In New York, the Crumbs is joined by a cupcake truck, Sweet Revenge, Babycakes, and Sugar Sweet Sunshine. The Post notes that in D.C., "established bakers such as CakeLove, Just Cakes, Furin's, Best Buns and Baked & Wired are all in on the act." Operating in what is essentially a commodity market, newcomers try to distinguish themselves by offering twists on the familiar formula. Hello Cupcake, conveniently located near Slate's D.C. office, specializes in organic, seasonal, and local ingredients. Babycakes offers vegan cupcakes. Coming soon to a precious storefront in a gentrifying neighborhood of Brooklyn: sustainable cupcakes made of flour ground from organic wheat raised in Prospect Park, served in wrappers recycled from old copies of the New York Review of Books.