Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=164208
Story Retrieval Date: 5/19/2013 11:56:41 PM CST
Money can’t buy you love, but judging by the testimony of one Chicagoan, a quick $4 might buy you a few minutes of bliss.
“Cupcakes make you happy,” said Joe Collord, 28, who buys the small desserts regularly no matter what the price. “Everyone who buys a cupcake walks away from the transaction in a better mood than they were before.”
Could such sentiments have economic significance?
Well, the U.S. bakery industry already comprises about 2,500 commercial bakeries and 6,000 small retail bakeries, according to a report released in April by First Research Inc., a market analysis firm. Together these segments have annual revenues of $28 billion, according to the report.
There still may be room to grow, despite Americans' professed desire to eat healthy.
During times like these, when consumers cut back spending on vacations, designer clothes or electronic gadgets, specialty food items can be one indulgence that people can still afford. According to Peter Babcock, chef instructor for the International Culinary School at the Art institute of Fort Lauderdale, there might be no limit on what folks will pay for a pleasant feeling--nostalgia, for instance--stimulated by a cupcake.
“The bulk of the population is baby boomers,” Babcock said. “We’re in the sense of getting back to where we were in our childhood when families prepared baked goods.”
Seeing the potential for a market expanding as quickly as Americans' waistlines, several new bakeries in Chicago are capitalizing on consumer and market demand for a little something sweet. Some have hatched their businesses in a rental kitchen in the West Loop called Kitchen Chicago LLC, which enables them to keep start-up costs down and progress more rapidly toward profitable margins and expansion.
One cupcake bakery, Sugar Bliss Cake Boutique, specializes in gourmet cupcakes piled with high with flower-shaped buttercream frosting. Owner Teresa Ging left a job in finance to start her business at Kitchen Chicago, until she had grown a large enough customer base to open a commercial bakery and shop at a prime downtown location,115 N. Wabash.
“I knew I eventually wanted to open a retail store, it just took another year,” Ging said.
About 20 businesses are currently operating at Kitchen Chicago, which rents space and equipment for $14 to $24 per hour, depending on peak or off-peak hours and frequency of use. Founder Alexis Leverenz said that nearly 80 percent of renters are producing baked goods to sell at local farmers markets, gourmet grocery stores or wholesale to coffee shops.
An investment of $1,000 upfront is all it takes to begin a business at Kitchen Chicago, as opposed to anywhere from $50,000 to $100,000 for setting up a commercial bakery. A City of Chicago food service sanitation certificate, $1 million liability insurance policy and a retail food establishment license are mandatory, but if all requirements are met, an entrepreneur can walk in and start baking on the same day, according to Leverenz.
“This allows them to focus on building their business and their products to the point where they can eventually open their own storefront,” Leverenz said.
Ging now has 11 employees to help bake about 20 flavors of regular and mini-sized cupcakes. The most popular flavors at Sugar Bliss are red velvet and "black & white," which is a chocolate cupcake with vanilla buttercream frosting. Another offering is the “frosting shot,” which is a ketchup-cup of sweetness for $1.
With heavy foot traffic and wedding cupcake orders on the rise, cupcake shops like Sugar Bliss are “more than a trend” and “not going to go away any time soon,” according to Ging.
“We had a great year last year, and this year is just getting better and better,” Ging said, though she declined to disclose sales figures.
Tiffany Kurtz, another entrepreneur who left her business career to make a living from cupcakes, will debut Flirty Cupcakes LLC this weekend with the launch of the city’s first “cupcake truck."
Kurtz, who also rents kitchen space at Kitchen Chicago, plans to sell baked treats out of a van that will make routes throughout Chicago based on location requests by Flirty Cupcake’s Twitter followers. Though the van isn’t set to make its first route until May 8, Kurtz has built up an impressive fan base through social media, with more than 500 Facebook fans and nearly 800 followers hanging on her every tweet.
The concept came to Kurtz when she saw an old, beat up ice cream truck driving down the street, and envisioned a similar service but “updated for city folk.” After finding a van, painting it baby blue and outfitting it with running water and refrigeration, Kurtz, who ironically doesn’t bake, hired a baker to develop cupcake recipes. Together they developed a menu of seven daily flavors, including “Curious George,” a banana chocolate cupcake with salted caramel frosting, and “Devil In Disguise,” a cream cheese frosting-topped red velvet cupcake.
“I thought it was a hot trend and something that everyone would like,” Kurtz explained. “Who doesn’t love a cupcake?”
Kurtz said the target market of a cupcake truck is different from the clientele of a traditional ice cream truck. The treats, priced at $3.25 apiece or $5.25 for a package of four minis, are directed towards professionals in the city looking for “convenience” and a “treat during the day,” according to Kurtz.
Chef Babcock of the International Culinary School said he thinks the cupcake business model will continue to grow because it's as “charming to children as it is to adults,” and the market is so competitive now that it will “thrive upon itself.” He pointed out that creativity in appearance is key; however, bakers can’t scrimp on quality of ingredients and expect to retain customers.
“Presentation has to be equal to the flavor,” Babcock said. “We’d rather have something that tastes really great rather than how it looks, but a good combination of how it looks and tastes will position it perfectly.”
Babcock said the market for commercial bakery foods is growing because families are not baking at home as they used to, and the customer’s desire to consume homemade desserts and willingness to pay for quality is driving prices higher.
He noted that basic baking ingredients, such as flour, eggs and sugar, are cheap, so it’s the formulation of ingredients to create a tasty product that adds the value. However, some bakeries sacrifice freshness and flavor for convenience by freezing their goods, which results in a product that's overpriced, though consumers may not realize it, Babcock said.
In an unusual comparison, the chef likened the cupcake market to the housing market. When housing rapidly increased in value several years ago, Babcock explained, people bought into it thinking they were really getting something of great value, which turned out to be a “false sense of grandeur.” The same is true when buying a cupcake, according to Babcock, as a customer might knowingly spend more than she should in pursuit of the feeling of security.
“People are under the impression that if they pay more, they’re getting something that might be better than it really is,” Babcock said. “Everybody feels so strapped, they think they can treat themselves, even if the product doesn’t warrant the price.”
Bakeries like Sugar Bliss Cake Boutique and Flirty Cupcakes offer instant sweet tooth gratification, but may come with a hefty price to customers’ wallets and health if not consumed sparingly. A cupcake-a-day habit at either of the stores could subtract nearly $90 and add more than 2.5 pounds a month, given that the average cupcake contains roughly 300 calories.
Nevertheless, Babcock declared, “People are not afraid to spend the extra money to treat themselves in a way that they get some self-fulfillment and a little bit of that timeless feeling that may have been lost."