Indulgent cookie shops could be headed for a reckoning

These days, Chicagoans don’t have to look far for an oversized cookie. Crumbl, known for the social media flurry surrounding its 700-calorie cookies, has more than 30 Chicago-area stores. New York-based Levain Bakery, with its 6-ounce numbers, plans to open its third Chicago store on Armitage Avenue this fall. Chip City’s fourth Chicago store is heading to Wicker Park. Insomnia Cookies has 11 Chicago-area stores, with more to come. And delivery expands their reach. Chicago is not alone in its flush of cookie options. The nation is in the midst of a big cookie boom. Beyond private-equity, venture-capital and franchisee investments fueling the expanse are consumers hungry for an affordable indulgence. After years of watching grocery bills soar, people are cutting back spending. But they still want to treat themselves. Five or six bucks might seem expensive for a single cookie when it’s stacked up against an entire pack of Oreos, but it’s cheaper than going out to dinner. “It’s just a very high-stress time … and it’s a crazy expensive time,” said Mike LaVitola, founder of upscale convenience store Foxtrot, which sells several big cookie brands, including its own. “If you can get a super-indulgent cookie that’s going to fill you up for $6 and you’re going to feel good about it, that feels like a win.” Ad Age Small Agency Awards Showcase your agency’s creativity, business success and commitment to a thriving workplace. Enter today But a cookie can’t stay warm forever. Some experts say the category is reaching a saturation point. Dessert fads come and go. Like cupcakes and frozen yogurt joints—remember Pinkberry?—big cookie concepts could be headed for a reckoning. They’ll need to adapt, finding ways to keep people coming back without straying too far from their core business. They must set themselves apart in an increasingly crowded market. “You’re going to see this large boom and then probably a bust,” said Jeff Pehler, partner at business management consulting firm West Monroe. He predicted cookie stores could start shuttering in 18 to 24 months. “There’s just way too many in the market, and the (customers are not) buying on a regular basis.” Seven out of 10 people who made a purchase at a cookie chain in the past year only went once annually, Pehler said, citing credit card transaction data. The remaining 3 out of 10 customers—the big cookie loyalists—visited about three times a year. The average order for Philadelphia-based Insomnia Cookies is about $17.75, and $19 for Utah-based Crumbl. To survive, cookie chains will need to expand their customer base and get people to spend more. That’s a tall order in the world of big cookies. Unlike coffee, oversized sweets are not a daily habit for most people. As such, loyalty programs don’t work as well with indulgent products. Cookie chains must create excitement to keep people coming back. Experts say that Crumbl does a good job of this. Customers flock to social media every Sunday night to discover the week’s upcoming flavors. More news: Dove and Crumbl partnered on a body care line Likely, these chains will also start adding products beyond cookies. Some are already dabbling. Crumbl sold pies last Thanksgiving. Levain’s cookies are its top seller, but it’s also a full bakery, selling loaves of bread, pastries and coffee. Those offerings not only drive visit frequency and margin, but set Levain up as a place where customers can linger. That makes the business more attractive to landlords, said Will Winter, VP of Stone Real Estate. Beverages could appear on cookie store menus, too, said RJ Hottovy, head of analytical research at location analytics company Placer.ai. They are high-margin, easy to roll out, and drive customer visits. But adding new items is risky. “Every time you add a new product, you move yourself farther away from your brand and you add complexity,” he said. “Not everyone will be able to pull it off.” Read more: 7 Brew CMO on the coffee chain’s rise For their part, owners of the cookie chains remain bullish. Some brands have been around for decades. Surviving the pandemic gave them the confidence to expand. Investors see the value proposition in the store’s lower operating costs and smaller storefronts. Consider New York-based Chip City, which makes its dough at a commissary in Queens, then ships it to its 45 stores for baking. That cuts down on equipment and labor costs and store size, said co-founder and CEO Peter Phillips. Most owners feel they already differentiate themselves among the competition. Insomnia—one of the only brands with a location on Chicago’s South Side—delivers warm cookies at a lower price point than some of its competitors. CEO Seth Berkowitz founded the company in 2003 when he was in college. It now has 325 locations and plans to open another 65 this year. “When we deliver warm, delicious cookies, it leads to more purchases,” he said. “That has been true for as many days as I’ve been doing this.” Cookies live in the realm of nostalgia. A warm, gooey, housemade cookie reminds people of childhood. And for many, that is a priceless feeling. Their universally beloved nature transcends age groups—driving a diverse client base throughout the day. Crumbl owner-operator Heather Wardell sees that in her west suburban Glen Ellyn and Glendale Heights stores. Morning customers might grab a box to take to the office, but by mid-afternoon, the after-school crowd has flooded in. Wardell and her husband decided to franchise with Crumbl about three years ago, after their daughter got them interested. Week after week, they watched her climb into a carload of fellow sugar-lovers, make the half-hour drive to the Schaumburg Crumbl, and wait in line for 45 minutes to try the new flavors. Three years in, and both locations are profitable, Wardell said. The customer base is increasing, and sales are either stable or growing. Wardell remains confident, but she has noticed the competition heating up. Crave Cookies is preparing to open a store about three miles away, in Lombard. “The future, with any restaurant business or any kind of niche market, I would say is unknown,” she said. “We believe in Crumbl—oh my gosh do we believe in Crumbl—or else we wouldn’t be here. But at the same time, you never know how the consumer is going to react to your product, or when the next biggest and greatest thing is on your doorstep.”

Indulgent cookie shops could be headed for a reckoning

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