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The Great Cupcake Wars

You know who plays for keeps these days? Cupcake makers. The stakes are high. Ditto, our correspondent’s blood sugar

Renee Comet

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"Oh, great! Another cupcake shop!"
I hear these words as soon as I step onto M Street, the posh, townhouse-lined retail thoroughfare in Washington, D.C., and most lately the raging epicenter of the great American cupcake pandemic. I'm standing in front of an outpost of Sprinkles, a California cupcake chain that joined the fray just the week before. The words (shouted by an upscale-looking man into his Bluetooth headset as he tore down the street, his fine-leather messenger bag flapping behind him) foretold my future, at least for the next 36 hours. I had traveled down to the nation's capital to investigate the cupcake craze—to find out who eats them, and more important, who sells them, how, and why.

Cupcake shops are everywhere, and the craze has perplexed me. I mean, I knew cupcakes growing up. Back then, the whole family was two flavors, chocolate and vanilla, and a preservative-addled cousin, Hostess, that loitered around truck-stop and gas-station snack racks. But I hadn't seen them much since. That is, until a few years ago.

The cupcakes showed up at an office party, looking prettier than I remembered. Then, again, at a stylish wedding. They had new names—vanilla was now Madagascar Bourbon Vanilla; chocolate came with a sophisticated-sounding topping called ganache. Everywhere an affluent crowd gathered, cupcakes seemed to be popping up. They had appeared on an episode of Sex and the City, someone told me. And they cost a fair bit of money, three or four dollars apiece. A lot of people were making them and making a living—sometimes, a killing—selling them.

Many of those people are in our nation's capital. Washington doesn't just have dozens of cupcake bakeries; it also has a TV show, TLC's DC Cupcakes, currently in its second season. Inevitably, perhaps, cupcake chains from elsewhere are moving in to lay claim to the city's aficionados. New York City—based Crumbs has three locations. In early March, the most aggressive cupcake company of all, Los Angeles's Sprinkles, opened a location in the Georgetown neighborhood. When I arrived the following week, a Mercedes Sprinter van called the Sprinklesmobile, the tip of the Sprinkles spear, had been blanketing the city with free cupcakes for four straight days. I tried one of Sprinkles's peanut butter chocolate cupcakes. It was damn good.

Sprinkles's co-founders, Charles and Candace Nelson, are former Silicon Valley investment bankers who fled the profession in 2001, after the dot-com bubble burst. The two regrouped in the world of cupcakes and opened their first store, near Rodeo Drive in Beverly Hills, in 2005. They got their cupcakes into the hands of celebrities such as Tyra Banks and Barbra Streisand and Oprah, whose adoration has since echoed in Sprinkles's press releases. To lend an air of preeminence, the Nelsons started calling Sprinkles The World's First Cupcake Bakery, a statement that's technically true, but only if you disqualify the star of the seminal Sex and the City cupcake episode of 2000, Magnolia Bakery, and another landmark bakery called, as a matter of fact, Cupcake Café, because both make other baked goods in addition to cupcakes (as Sprinkles does not). Then Candace got onto the Food Network show Cupcake Wars, not as a contestant but as a judge, cementing her place over any would-be competitors. And finally, just in case any competitors got too close, the Nelsons engaged the powerful Silicon Valley law firm Wilson Sonsini Goodrich & Rosati to attack any dessert purveyors they felt were encroaching on their turf. So far, they have sued three, for infringing on their name or their cupcakes' distinctive fondant dot, and sent cease-and-desist letters to more.

So when Sprinkles arrived in D.C., it didn't pick just any location; it threw down the gauntlet, opening three blocks from Washington's current cupcake champion, Georgetown Cupcake, whose customers form lines that snake up the street. Here in D.C., the battle was on.

But before we go any further, let me point out something funny about cupcakes. Maybe because the recipe is so simple—flour, sugar, eggs, butter, milk, and salt—it gives the entrepreneur room to project. Cupcakes turn out to be one of those products that are a Rorschach test for their makers. No two cupcake companies are alike. As I made my journey, eating my way through the trenches of D.C.'s cupcake wars, I would find the city's bakeries operating and competing in very different ways.

The Corporate Cupcake
After a slightly uneasy night's sleep (I had overdone it that evening at Baked & Wired, a well-entrenched Georgetown cupcake establishment), I start the first full day of my trip at Crumbs Bake Shop in downtown D.C. Crumbs is the nation's largest cupcake company, with 35 locations and $31 million in annual revenue, and also the most corporate, with plans to trade shares on the Nasdaq starting in May. This store, on 11th Street NW near F Street, opened last November. I'm scheduled to have a 9 a.m. breakfast meeting with Gary Morrow, the new vice president of store operations for Crumbs Holdings LLC.

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