Cup Cake Craze Crumbles

Don't confuse a fad with a consumer trend - that's the lesson from the crumbling empire of Crumbs Bake Shop Inc.  in America.  Back in 2000, an episode of the popular television show, Sex And The City featured cup cakes at the star's birthday party.  Immediately, specialty bakeries popped up all over North America.  The most ambitious was Crumb's Bake Shop which opened its first bakery in New York, 2003.  Over the next 7 years, Crumbs opened a chain of 70 bakeries in 12  U.S.  states.  Its early success led the company to go public on the New York Stock Exchange and shares hit a high of U.S.  $13.  in 2011.  Last week, Crumbs reported a loss of $23 million and shares tumbled to 11cents.  It now expects to default on $14 million in loans.  So much for building an empire out of a single snack item.

Another important lesson for anyone planning to launch their company on a stock market is not to over promise.  Crumbs attracted many investors but with that interest came expectations.  The company rapidly expanded but with a single product, couldn't sustain consumer growth.  Robert Carter, CEO of market research firm NPD Group noted:  "Crumbs was too focused, too much of a niche....... a large single - item chain like that just isn't a sustainable business model unless you tie it in with a bigger offering".  Another analyst, Peter Saleh, said:  "The pressure of keeping shareholders happy may have led Crumbs to grow too quickly ....  once you go public, you start promising certain growth metrics".

Slow, but sustainable growth is the key to success in any business.  One such good news story is Prairie Girl Bakery, a 3 year old business in Toronto, Canada.  President, Jean Blacklock, went to New York to investigate the Crumbs disaster and learn from their mistakes.  She observed:  "When you look at their business model, their inventory was out of whack with consumer tastes and they went into too many locations.  I don't have visions of grandeur to become the cup cake queen of Canada and open 100 stores.  And if I did get that notion into my head, I'd pay the price".  Today, Prairie Girl Bakery has 3 locations but management is very cautious about over saturation of the market.  Their motto - slow but steady - is a reminder to up and coming entrepreneurs to follow your dream but don't lose touch with reality.