Cupcakes and the Economy.2

Commuter hours in Grand Central are always crowded and frantic, but they’ve gotten even crazier since Magnolia Bakery opened in the downstairs food court this February. The popular, New York-based bakery has attracted long lines of customers since it opened, particularly commuters and tourtists who regularly pass through the large train station.

Known for its cupcakes, Magnolia Bakery first opened in the 90s on Bleecker Street in the West Village; since then, the company has opened bake shops at Rockefeller Center, on the Upper West Side, in Grand Central, and in the new Bloomingdale’s department store in Dubai.

The current owners of Magnolia Bakery, Steve and Tyra Abrams, decided to open a branch in Grand Central in early 2009, when space became available for leasing in the food court. This provided a rare opportunity for the company said Lara Rhyner, the 26 year-old general manager of the Grand Central location. According to her, most of the stalls in the food court have been there since it opened, and spots only become available about once or twice a decade.

“We’ve just been increasing and increasing,” said Rhyner, who has worked at all of Magnolia Bakery’s locations since she began with the company two years ago.

Despite the current economic recession and nationwide rise in unemployment, Rhyner said the bakery has been experiencing great prosperity. It took a little hit last year, she said, when the economy was really down, but other than that business has been booming.

“Baked goods is something people gravitate towards during hard times,” Rhyner said. “So we’re kind of indestructible.”

According to economic law and the price elasticity of demand, it is true that the food industry tends to survive economic crises better than other industries. This is largely because the food industry is rather inelastic, meaning that consumer demand is stable. Prices don’t have a huge affect on demand, because consumers will purchase the product despite price increases.

According to Misty Martin, the spokesperson for Magnolia Bakery, the company had to increase prices due to increases in ingredient prices over the past two yearsut sales have remained relatively steady.

“A fresh, well made cupcake has the power to do many things,” said Martin. “It reminds us of childhood and the notion of simpler times when things are not so simple, it comforts us on a blue day. And no matter what the economy, one can always depend upon it being absolutely delicious.”

Magnolia Bakery has opened three new branches in the last 2 years-- one near Rockefeller Center in October 2008, and then the Grand Central and Dubai locations this February. According to Rhyner, general manager of the Grand Central store, the company will be opening a new branch in LA this May and will be expanding elsewhere in the United States, though the owners have decided that the Grand Central location will be the last one to open in New York.

This expansion comes at a time when many Americans are suffering financially, yet research implies that the food industry, which was not too badly damaged to begin with, will only be on the rise in coming years. Though the Bureau of Labor Statistics did report an increase in unemployment in food and beverage stores in 2008, it also estimated that employment in food services and drinking places would rise by 7.7% between 2008 and 2018.

“New Yorkers have a spirit of resilience and can weather the most difficult circumstances,” said Martin, in regards to the effect the economical crisis has had on New York City. “The city has pulled together in a way that is reminiscent of the terrible wake of 9/11.”

Magnolia Bakery’s success can be partly attributed to it’s reputation in New York City as one of the tastiest bakeries; it has also gained a number of pop culture references, including a cameo in a Sex and the City episode.

“It’s been crazy, “ said Meggie Kwiatkowski, a manager at the Grand Central location, who is 25 years-old and has worked at all the other Magnolia Bakery locations previously.

“Lots of tourists are surprised, because they didn’t know we were in Grand Central,” she said, adding that the Grand Central location could even be taking away business from the company’s other locations, because the train station sees such a great number of diverse people on an everyday basis.

But even the Magnolia Bakery that opened in Dubai, a country that had no previous experience with the company, has experienced great success.

“It’s nuts over there,” said Rhyner, the general manager of the Grand Central location. “People are just screaming Magnolia Bakery while they wait for cupcakes.”

Indeed, it seems that the company has no plans to stop expanding; according to Martin, Magnolia Bakery has extensive expansion plans, though she was not at liberty to reveal the new locations. She did say, however, that they would be in the United States.

It doesn’t matter how bad finances are, it seems, or what the price is: there will always be sufficient consumer demand for cupcakes.