We’ve previously covered cupcakes as the next big food trend. It appears that cupcakes may just have been a bubble which is now collapsing:

• Crumbs Bake Shop – a chain that sells cupcakes that cost up to $42 – has seen its share price drop from $13 to $1.70 in the past 18 months.
• This is in part because the cupcakes were a novelty. People enjoyed them a few times, but there isn’t much repeat business.
• The barriers to entry in the market are also low and there has been a flood of competitors who’ve eaten away at Crumbs’ market share.
• Image issues contributed to the decline – at least one former employee claims that the premium cupcakes aren’t always fresh.
• For its part, Crumbs claims that its disappointing financial performance is due to $700,000 in lost sales during the time of Hurricane Sandy.

Read more about the cupcake bubble, what experts have to say, and a potential future strategy for Crumbs over here.

Source: The Wall Street Journal