The Rise And Fall Of The Gourmet Cupcake

lamantin via flickrIn 2011, Crumbs Bakery announced it would go public in a reverse merger worth $66 million.

The company’s stock held at $13 for most of the year, but now — two years later — it’s down to $1.40.

Is the cupcake craze coming off its sugar high? 

The craze first began in 2000, when Miranda and Carrie munched on Magnolia's Cupcakes on an episode of Sex and the City.

People quickly jumped on fashion trends the show featured.

This time, they jumped on the culinary trend, too.

Tourists started flocking to Magnolia Bakery's West Village location. And then a Sex and the City tour bus made the location a destination on its NYC tour.

Emma Forrest wrote an article detailing how the cupcake craze at Magnolia ruined her neighbourhood, as tourists began flocking their in droves.

Even Magnolia couldn't keep up with the demand and was taken off the tour in 2010. It was replaced with Billy's Bakery.

After that, cupcake shops started popping up around the country. Sprinkles Cupcakes, founded in 2003, was one of the first.

Its cupcakes went for $3.50 and it bills itself as being the instigator of the cupcake craze.

Its founder, Candace Nelson, later became a judge on Food Network's Cupcake Wars.

Georgetown Cupcake in Washington, D.C., opened in 2008, and Cupcake Nouveau in Miami also became well-known names.

Georgetown baked its way to a TLC show, DC Cupcakes, and recently opened its first New York City location.

Cupcake Nouveau was also featured on TLC on Cupcake Wars.

But when Crumbs came around, it blew past the competition. The store was founded in 2003 in New York and grew to 34 locations before going public.

Mia and Jason Bauer opened Crumbs Bakery on New York City's Upper West Side in 2003.

Its cupcakes sold for about $4.50 and the company had locations in six states before its IPO.

Now, the company has 67 locations in 10 states from the West Coast to the East Coast.

There are 19 locations in Manhattan alone.

Across the country, at least five more shops are set to open soon, according to the company's website.

But by 2012, the company's stock starting to fall. And now, it's really tanking.

Crumbs' stock is currently trading for $1.40.

That's a fall of more than $12 from its original peak in 2011.

The company has pinned part of the problem on sales loss in its East Coast stores after Hurricane Sandy.

The company estimated the superstorm caused at least $700,000 in losses from its stores that had to close, according to The Wall Street Journal.

But some investors started to get suspicious that bad things were on the horizon last week when Crumbs said it needed to raise $10 million in financing.

Julian Geiger, Crumbs CEO, said the funds were needed to fuel the company's growth into suburban malls, according to BakingBusiness.com.

The co-owner of Canadian frozen yogurt chain Yogen Fruz stepped up to invest.

Now, some analysts are saying that Crumbs' stock plunge is signaling the burnout of the gourmet cupcake fad.

One told the Wall Street Journal that 'the novelty has worn off.'

A Jersey City bakery said that her store brings in half the weekend sales as it did last year.

The market is becoming over-saturated. The number of Crumbs has grown more than sixfold since it was founded.

One analyst noted that people can bake cupcakes themselves and don't need to go to a store every time they want one of the treats.

'Demand is flat,' he told WSJ.

And some people say that cupcakes don't taste as good since they've gotten so big.

One writer in the Atlantic Wire voiced her hatred of big cupcake brands.

In her opinion, in most cupcakes today, 'the sugar tasted off, now, somehow, the frosting too cloying, the cake part of the cupcake so dry it stuck to the roof of our mouth.'

The cupcake industry is still expected to grow. But the rate has slowed from recent years.

A story from CNBC says the cake decoration store industry is still expected to see a 3.7% annual growth in the next five years.

But that growth number used to be 4.9%.

Now see how another upstart is selling its product.

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