(image nabbed from here)

The NY Times food section today has an article, The Latest Entrepreneurial Fantasy is Selling Cupcakes.   The article is about how cupcake shops have become the new answer for people looking to own their own business, how it’s spreading beyond NY and LA to the rest of the country.  There’s at least one in Hong Kong and judging from his URL, which has “Asia” in it and not “Hong Kong,” he’s got definite future expansion plans.

The article looks at four different kinds of cupcake businesses.  In the 4th type, “the sole bakery,” there’s an interesting economics lesson there.  I think people have this habit of eating out, seeing a restaurant charge $300 for a steak and wonder why the mark-up is so high when they can buy that same steak in the supermarket for $50.  They tend to forget that food cost is just one of many costs that an establishment has to deal with and build into the price of their goods.

Lovely Confections Bakery in Denver charges US$3 per cupcake.  The cost of the ingredients in that cupcake comes out to 60 cents.  So does that mean $2.40 profit on each one?  Hardly.  Add to that, “57 cents on mortgage payments and utilities, 48 cents on labor, 18 cents on packaging and merchant fees, 16 cents on loan repayment, 24 cents for marketing, 18 cents for miscellaneous expenses and 4 cents for insurance. That totals $2.45, leaving a potential profit of 55 cents on each $3 cupcake.”

I’m sure that the exact breakdown wouldn’t work for Hong Kong – rent would be higher, labor lower – but the totals would be pretty darned similar.

I wish that cupcake shops would take off here but they probably won’t for a variety of reasons.  Cupcakes are fondly remembered childhood treats for many westerners, not for locals.  And local taste doesn’t run to very sweet stuff, as the demise of Krispy Kreme in Hong Kong shows.  As far as I’m concerned, all of the local bakery chains in HK suck big wet ones (my helper recently brought back some chocolate cakes from one that has a branch in Sai Kung and to my taste it was very salty and the cake part was too airy) but their on-going success would seem to be proof that they suit local tastes just fine.

Even so, I get frustrated by the fact that other cities in Asia – Tokyo, Singapore, Taipei – offer a far wider variety of western baked goods (and western bakery chains) than Hong Kong.  The few decent (IMHO) bakeries and bread shops we have seem to be limited to the 5 star hotels and expat-heavy districts.   We have two “foreign” bakeries in Sai Kung, Ali-Oli and Mushroom, and to be honest, I like their breads but think their cakes fall pretty far short of the mark as well.

Then again, in terms of keeping my waist-line where it is, in terms of me continuing to fit into the slimmer jeans that I bought on my US trip, it’s probably not a bad thing that I don’t like Hong Kong bakeries.  Less temptation, less weight.

Which reminds me, time to get some dinner soon!

UPDATE:  Just been informed by a shy emailer that there are several cupcake shops in HK.  They’re certainly not in any of the areas that I generally get to.  But maybe there’s one near you – let me know if it’s any good!