Wednesday, December 30, 2015

State of The Cake Union for 2016

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The custom cake business had changed A LOT since I started doing cakes 20 years ago. Last year I did a three-part series that predicted where I thought the industry was going, and unfortunately I think it was pretty accurate. (Click here for part 1, part 2 and part 3.)

I don't have much to add to that gloomy forecast other than to say that things are pretty much continuing in the direction they were headed at the beginning of last year. I know of at least 4 local cake businesses that have closed in the past year, plus many more that I've seen in other areas, and that's of the established ones, not the fly-by-nighters. The market is glutted with cakes that people are selling for rock-bottom pricing because they're not paying attention to the business side of it, and are basically recouping their costs (if that) instead of making a profit.

There are also more people who have transitioned their businesses toward more teaching as opposed to actually making cakes, which I also wrote about last year. If you think about it I'm sure that you can come up with five or six "famous" decorators who don't actually sell cakes at all, they just run cake decorating schools online or teach at conventions. No shame in that game, but it does show that the market for custom cakes isn't what it's cracked up to be.

Personally, I'm doing fewer cakes because after 20 years my back is starting to give out and I'm not interested in surgery. I have my minimum in place so that the cakes I do will be more profitable and avoid the little time-sucker cakes that don't pay as much as larger ones. I'm doing more online sales and writing, and I'll be working with American Cake Decorating magazine this year on a series of business articles, so watch for that.

For the upcoming year, I'm thinking that wedding cakes will continue to be the money-maker as far as custom cakes go, but with a twist, more on that below. Smaller custom cakes just aren't going to be as profitable as they were because of the number of people making them. Because of that, you'll need to have a good strategy or an established business that's kind of seen as a local institution to make a decent profit.

People who make only custom birthday cakes and that kind of thing are going to run into the issue of the "facebook pricing club," where people expect the lowest price for everything and shop based on price alone. It's going to be hard to fight that, so you'd better get a good marketing plan in place. One that DOESN'T include posting on Craigslist.

As far as wedding cakes go, that's where you're going to be able to make money, as long as you price them correctly. Charging $150 for a three-tiered cake isn't going to cut it, so get my pricing guide and make sure you're charging correctly. The twist that I mentioned above, though, is that the traditional wedding cake is going to have to share the stage with different desserts. Cupcakes, dessert buffets, and even pies are options that people are using more often for their wedding receptions, and you'd better be ready for it.

Increasing your menu is going to be important in upcoming years for both wedding cake decorators and people who don't do weddings. Some good books to get on this subject would be the ones by Mimi Fix, especially Home Baking For Profit. (Click here for the book: Home Baking for Profit )  Expanding your line of available products can give you the edge when it comes to booking a wedding, since brides will be more likely to hire someone who can provide an array of goods instead of just a cake as multiple desserts becomes a more common option.

Having said that weddings are where the profits will be, I'll add that you'll still have to do a lot of cakes to make a decent living. The overall profit per wedding cake isn't as high as people think, once you take all of the time spent on marketing and paperwork into account. So keep that in mind when planning your year (And have you downloaded my free 2016 planning guide yet? Go do it now if you haven't.)

The last thing I'll say about the upcoming year is that the downward trending prices are probably not going to stop any time soon. As long as there's a social media platform for people to post a picture of a five-tiered cake and ask who can do it for the cheapest price, there will be people willing to do it for the cheapest price.

If you want to run an actual business, you should take a real look at your local market and be realistic about what you need to do to fit into the new reality of whatever is happening on your area. Because things aren't what they used to be, and your business will need to adapt to survive and thrive in 2016.


Kara Buntin owns A Cake To Remember LLC,  online cake supplies at  www.acaketoremember.com and www.acaketoremember.etsy.com

3 comments:

Kate said...

With seemingly every cake decorator in the world turning to teaching, tutorials, etc. it will be interesting to me to see how quickly the market reaches as saturation point, especially since as you have pointed out these decorators seem to be mostly teaching other cake decorators, and that is a pretty limited market. Perhaps, it is already getting to that point. Frankly, as someone who does make an effort to take classes both in person and online, I honestly can't keep up with sheer amount of people teaching and platforms selling tutorials this point. When Craftsy first started offering classes, I was excited with the offerings and some of the teachers and techniques that were available and utilized the service quite a bit; however, lately I have been less impressed with what has been offered and they are releasing new classes so quickly, I haven't purchased a class in over a year. I wonder what happens when you have put all your effort into teaching and your classes stop filling up and cake shows start shutting down from dwindling attendance because there are too many. Do you go back to selling cakes?

Kara Buntin said...

I think that by the time that happens they won't be able to sell cakes for any amount of decent profit. They'll have glutted the market with enough people who are selling cakes and it will be more of a buyer's market than it is now!

Colleen Charles said...

I have been making cakes and desserts for over 12 years now (starting in my son's restaurant) and moved on when he closed his restaurant. I continued on because customers kept asking me if I was going to keep making cakes and desserts. I do have a home based business and I'm 67 yrs old and I'm getting a little more than annoyed by what you are talking about....."how much will this cost" sending you a picture from Pintrest of a baby shower cake that would cost $300 and they balk when you tell them that. I use Cake Boss software and know what my materials and my supplies cost me and I add my labor and overhead to it. I've come to the conclusion, if you can't pay what I'm worth, then go someplace else. The young people don't value your time + energy that you put in to their cake; they are used to what we used to say 'champagne taste and beer pocketbook'.