Business & Real Estate

Mom-and-pop cupcake shops hang on despite a changing market

Consumers are sniffing out dessert trends this Valentine’s Day, and the once-rampant cupcake craze isn’t making the list. The closure of two cupcake shops in the past month hints that Sacramento’s love affair with this frosted delicacy is cooling as more novel confections sweep in.

Midtown bakery and sandwich shop TreyBCakes, once featured on Food Network’s “Cupcake Wars,” closed for good Jan. 31 when owner Trey Luzzi left for government service. His departure from the food scene followed the Jan. 19 closure of Icing on the Cupcake, a Rocklin-based cupcake chain with four local stores that folded due to financial struggles.

Kathi Riley Smith, a Sacramento restaurant and food consultant, said it’s no surprise that gourmet cupcakes are “falling off the map” considering the over-saturation of the market in the past few years. Google Trend charts tracking how frequently people have searched “cupcake” over time show a sharp rise in interest from February 2009 to February 2012, followed by a distinct plateau.

“This past year, we’ve seen a consistent decline in Sacramento,” said Riley. “It’s a trend, and trends rise and level out and go the other way.”

Right now, fine chocolate is ascendant. Next door to the shuttered TreyBCakes, customers line up at the immaculate white counter of chocolate maker Ginger Elizabeth Hahn, where the case contains such delicacies as rose caramel macarons and buttermilk lime chocolates. Among rows of bite-sized truffle squares and crunchy nut bark, there isn’t a cupcake in sight, though the pastry chef makes them for special occasions once or twice a year.

While a good cupcake vendor may be able to attract customers with a nostalgia factor, Hahn said, artisan chocolate has its own appeal as a luxury product with recently noted health benefits.

Ginger Elizabeth – operated for six years by the award-winning chef and her husband – is riding a wave of consumer demand that is attracting more competitors. Ramon Perez, a Sacramento native and nationally acclaimed pastry chef, moved back to his hometown two months ago to get the gears churning on Puur Chocolat, an online dessert boutique.

The agricultural offerings and culinary mentality in Sacramento have encouraged Perez to experiment with new twists on macarons which, despite their centuries-old European history, are just starting to boom in America. Perez said he may soon release a rectangular, candy-bar-like macaron as an alternative to the traditional circle.

“There’s a huge food revolution going on in Sacramento,” he said. “The consumers are trying to educate themselves and find something new and different. Cupcakes have been around so long they're already familiar.”

The gourmet cupcake trend peaked in 2011, when New York-based Crumbs Bake Shop took on a $66 million merger and added locations in 12 states. But the hype didn’t last, and the company’s stock plunged from more than $13 a share in mid-2011 to less than $2 on the Nasdaq stock market in 2013.

Meanwhile, chocolate sales will rise 6.2 percent to hit a record $117 billion next year, according to Euromonitor International Ltd. estimates.

Trendy or not, some cupcakeries are standing firm in a market that 2012 Cupcake Wars winner and Sacramento native Karen Henderson called “just too expensive.” Henderson runs a tight ship at cupcake shop Lila & Sage in Murphys, but when she looked at expanding to Sacramento last year, she decided the overhead costs were too high.

“It takes a lot to make that one cupcake, especially if you’re in competition with the most beautiful cupcakes in town down the street,” she said. “Where is our opportunity to grow when all these leases have us in a financial scare?”

Henderson, who also designs wedding cakes and caters events out of the Murphys shop, said it’s not that cupcakes are dying, only that they are getting harder to finance. While she’s updated her display case with hand-crafted macarons and biscotti, she still meets cupcake fanatics on a daily basis.

“Cupcakes – they’re never going to go away,” she added. “You just have to have a story with your cupcake. There has to be a tag that goes along with the brand.”

If a story sweetens a cupcake deal, Sacramento baker Carlos Mares has one for the books. Mares started out baking bread in Mexico and eventually moved to San Francisco, where he concocted a cupcake recipe using imported vanilla beans from his home country. He and his wife, Patricia, were visiting their daughter at UC Davis when they stopped at a frozen yogurt shop in Sacramento’s midtown and fell in love with the space. Mares bought the shop from its previous owner and opened Vanilla Bean Gourmet Cupcakes and Frozen Yogurt in 2010.

Four years later, Mares said he is doing well and has nearly 800 cupcakes to bake for Valentine’s Day. The vibrantly painted shop draws foot traffic from the Safeway next door and also caters events as far away as the Bay Area. In response to customer demand, Mares has added lines of gluten-free and vegan cupcakes to his display case. While the frozen yogurt provides a financial boost over the summer, the cupcakes are still more popular with customers, said Mares, and he has not needed to raise cupcake prices once since he began.

“When people acknowledge what you do, they come again and again,” he said. “When you sacrifice for something, you want to prove it to everybody you can make the real thing. It’s a real passion.”