- POSTED: 16 Jul 2014 07:41
Local businesses remain optimistic about demand despite the collapse of huge US cupcake company.
SINGAPORE: In the aftermath of the collapse of one of the biggest cupcake companies in the United States, local businesses that have looked to exploit the global craze for the sweet treats said they remain upbeat about demand.
But similarly with the string of food fads over the past few years, including bubble tea and donuts, analysts said the cupcake trend has reached its peak and will, more likely than not, follow in the footsteps of its previous food craze predecessors and see only the strongest companies survive.
Last week, New York-based Crumbs Bake Shop, which went public in 2011 at the height of a gourmet cupcake boom, filed for bankruptcy after struggling with steep financial losses in a crowded market.
After piling up US$28.5 million (S$35.4 million) of losses in the past two fiscal years, Crumbs Bake – which had huge ambitions of opening 200 stores in the US – was ultimately forced to shutter its 48 stores as popularity for the high-end cakes declined.
Despite a similarly crowded market here, local cupcake stores, such as Twelve Cupcakes, remain optimistic.
“We do not see cupcakes as being a temporary craze because in today’s fast-paced world with a need for convenience, the cupcake has taken over the traditional cake as the centrepiece for celebrations, birthdays and gatherings. It’s a lifestyle,” said a spokesman from Twelve Cupcakes, which is owned by celebrity couple Jaime Teo and Daniel Ong and has 15 stores across the island.
Another bakery, Oni Cupcakes, is even seeking to expand to a third outlet. “There is space to grow. Customers are becoming more sophisticated. They tend to know what they want and they want a lot of customisation in their cupcakes. We can meet those needs,” said owner Irene Chan.
But analysts sounded a note of caution for those still looking to cash in on this trend.
Like other previous food fads Singapore has seen, from Taiwanese bubble tea to Blackball grass jelly, donuts, cronuts, beancurd pudding and pancakes, the cupcake bubble could soon pop.
Ms YuYu Ong, a Euromonitor International research analyst, said: “Food trends emerge and fade off quickly. The cupcake trend in Singapore has attained its peak and it is currently plateauing before going on a gradual decline.”
She pointed out that as food fads are short-lived, those that fail to innovate will lag behind in the race. “Therefore, consolidation can be expected within the cupcake industry as only the established and popular cupcake brands will survive,” she said.
Historically, food trends begin to peter out within two years, pointed out Ms Ong.
“Brand owners, who are eager to earn higher profits, open up more and more outlets until the bubble bursts within approximately two years of the food trend emerging,” she said, adding that only a handful of companies – such as KOI and Gong Cha for bubble tea and J.CO for donuts – will end up surviving.
“Donuts, which were popular a few years ago, saw consumers queuing up for hours to purchase several boxes at one go. But the donut craze has faded in the past years,” she added.
However, stores here are confident they can innovate to stay relevant to consumers.
Twelve Cupcakes, for instance, said it produces new flavours every month, while Oni Cupcakes’ mainstays are customisation and quality ingredients – no preservatives and colouring in their cupcakes.
The Twelve Cupcakes spokesman said: “Just like in the US or Australia when the cupcake craze started more than 10 years ago, we think Asia is only in the beginning stages of the cupcake journey.
“In Singapore, there has been many other cupcakeries that have sprung up and it is great that Singaporeans will have more choices.”
Ms Ong of Euromonitor estimates that the cupcake trend might have another year to go before interest flattens completely.
She said: “The trend is likely to stay for at least another year due to several factors that continue to renew consumers’ interest. The novelty of having cupcakes with their favourite cartoon characters is able to entice consumers to substitute a normal birthday cake with customised cupcakes.
“In addition, flavour innovation and the ‘surprise’ element continue to renew consumers’ interest in cupcakes.”