Crumbs Bake Shop Is Coming Back To A Tough Dessert Market

In the latest sign that the cupcake craze is waning, the Crumbs Bake Shop chain is reopening after nearly declaring bankruptcy and is now selling a more-varied mix of cookies, ice cream treats, chocolate bars and concoctions like the “baissant,” a hybrid of the bagel and croissant. But fewer people are buying cupcakes and frozen treats, and coffee shops dominate the market for sweet bread.

“There’s a limited demand for sweets in general at restaurants,” said Warren Solochek, restaurant analyst at market research firm NPD Group. “These days many people, when they go out for an afternoon snack, they’re looking for a beverage, like a specialty coffee.”

The hottest part of the sweets market -- specialty coffees like cappuccinos and lattes -- rose 10 percent over the year ended August 2014 as Starbucks and Dunkin' Donuts expanded locations, while cupcake consumption was flat like the year before, NDP Group said. In 2012, cupcake consumption dropped 6 percent. The number of frozen treats sold, including ice cream and frozen yogurt, fell about 3 percentage points over the past year. And while the dessert market overall rose 4 percent over the year, donuts and sweet rolls sold mainly in coffee shops accounted for the rise.

Backed by CNBC personality Marcus Lemonis, star of the show "The Profit," and his partner Fischer Enterprises, which owns Dippin' Dots, Crumbs is reopening the doors of 26 locations across New York, Boston and Los Angeles in the next 30 days. In July, the shop closed 48 locations nationwide. Lemonis and Fischer paid $6.5 million to buy the chain plus another $2 million to reopen with a new menu that will feature some of their brands like Dippin' Dots ice cream, a Sweet Pete’s salted caramel cupcake and a Key West key lime pie cupcake. Cupcakes are now only half of Crumbs’ offerings.

"Saving this iconic bake shop was important to me not only because of its existing delicious products but [also] because there is a tremendous opportunity to expand product offerings so that every sweet lover can find something they’ll enjoy,” Lemonis said Tuesday on his blog.

In July when Lemonis announced he would back Crumbs, he said, "The goal ultimately is to really have it carry multiple products, whether it’s pies, cookies, ice cream, cake, a variety of things, because as things kind of move in and out of popularity, we want to be able to be nimble.”

Crumbs opened its first shop in 2003 on Manhattan's Upper West Side and then went public in 2011, just as the cupcake industry peaked. The company sold specialty cupcakes in flavors like caramel macchiato for as much as $5 each with as many as 800 calories per frosting-heavy mini cake.

The calorie count may have deterred a small segment of health-concious consumers, but “overall when consumers are out, they are purposely looking to indulge,” said Kim McLynn, spokesperson for NPD Group.

The real challenge for Crumbs is the price premium at a time when most consumers are closely watching their discretionary spending, Solochek said.

"It's going to be a hurdle," he said.