While the industry will continue to expand, growth will slow as the market becomes saturated. The industry will benefit from declining unemployment, which will raise disposable income, allowing individuals to spend on high-margin products.
Los Angeles, CA (PRWEB) October 18, 2011
The Cake Decoration Stores industry has recorded strong growth during the five years to 2011 According to a new report from industry research firm IBISWorld. Aided by the rising popularity of cupcake-only bakeries, revenue is expected to increase at an average annual rate of 4.9% over the five years to 2011. The industry will generate $919.2 million in 2011 with revenue growth of 4.0% in 2011. IBISWorld Industry Analyst Mary Gotaas said that “unlike many industries that sell discretionary products, the industry was able to avoid the adverse effects of the recession, with revenue rising 6.4% and 2.4% in 2008 and 2009, respectively. While disposable income dropped during the recession, consumers turned to these luxury food items as an inexpensive way to indulge. Over the five years to 2016, industry revenue is expected to grow at an average annual rate of 3.7% to reach $1.1 billion.”
“In addition to the launch of trendy specialty cupcake bakeries, the industry has introduced a range of new products that cater to different dietary needs, such as gluten-free, sugar-free and vegan cakes and cupcakes. Given the continued popularity of cupcakes and strong consumer demand for specialty desserts, new entrants have flocked to the industry,” added Gotaas. Over the five years to 2011, the number of companies is estimated to grow at an average annual rate of 5.5% to 2,807 companies. Nevertheless, specialty bakeries have had to contend with shrinking profit margins during the five-year period, as the price of inputs such as sugar, flour and milk have spiked. Consequently, profit margins are expected to contract from 6.3% in 2006 to 5.5% in 2011.
“While the industry will continue to expand, growth is expected to slow as the market becomes increasingly saturated. The industry will benefit from declining unemployment, which will raise disposable income, allowing individuals to spend on high-margin products such as wedding cakes and custom-designed cakes,” said Gotaas. While the industry will remain fragmented, cupcake-only stores such as Crumbs and Sprinkles Cupcakes will continue expanding their nationwide presence, with Crumbs planning on increasing its chain to 200 stores by the end of 2014. Other companies in the industry include Dunkin’ Brands and GiGi’s Cupcakes.
For more information visit IBISWorld’s Cake Decoration Stores report
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