Wicked Good Cupcakes Before Shark Tank
Tracey Noonan and Danielle Desroches are fellow Bostonians and the mother-daughter team behind Wicked Good Cupcakes. When Danielle moved out of the house, Tracey decided that they should take cake decorating classes to spend some quality time together. Soon, in October 2011, Wicked Good Cupcakes was born. With the recent popularity of gourmet sweets, like cupcakes and cake balls, their business took off. Customers loved their natural baking process, with no mixes or preservatives. However, Wicked Good Cupcakes began to grow faster than they expected. Tracey and Danielle need the sharks’ help to keep up with demand and bring a brand new idea to market.
Wicked Good Cupcakes During Shark Tank
Danielle was worried that the judges wouldn’t understand their Boston accent, but they were immediately charmed instead. Robert smiled through the pair’s request of twenty percent equity in exchange for seventy-five thousand dollars. Tracey told her story of accidentally stumbling upon this profitable business, in which she and her daughter could work together. When customers loved Wicked Good Cupcakes so much that they began to request nationwide shipping, Tracey and Danielle came up with their million dollar idea. The jar. Each cupcake would be placed in a mason jar, complete with layered filling, frosting, and a spoon. Customers could enjoy their cupcake right out of the jar. Tracey concluded the pitch with their willingness to work hard: they already put in thirteen-hour work days.
Of course, the sharks had to test the product. Robert took the opportunity to try his best Boston impression of the word “jar,” and to her credit, Danielle let the sorry attempt slide. Most of the sharks loved what they tasted. “As a fellow Bostonian, that is one damn good jar of cake,” Kevin raved, in rare fashion. Since the beginning of the year, Wicked Good Cupcakes had done one hundred fifty thousand dollars in sales, half of which came from the jars. Robert had concerns that Tracey and Danielle were offering only the jar side of the business, but Tracey clarified that both were up for grabs. This detail comes up fairly frequently. Some business owners will have several companies in the same consumer space but offer only one of them for investment. The risk here is that an entrepreneur would take this capital and invest it in their other companies.
The sharks, with Kevin at the helm, wanted to be sure of Wicked Good Cupcakes’ growth potential. Three hundred sixty thousand dollars in annual sales was decent, although low for the long-term. When considering costs of materials, rent for their storefront, and salaries for the two of them, very little would be left. While selling cupcake jars online was profitable, and experiment in wholesale retail through a Massachusetts distributor left something to be desired. After producing eight ounce jars for two dollars and fifteen cents, they were being sold to the distributor for only three dollars each, a low margin. Kevin was concerned with how Wicked Good Cupcakes might lower production costs. Tracey thought she could lower the production cost of the smaller jars to a dollar and forty-five cents with better equipment, but Kevin was still hesitant.
Margins weren’t the only problem for Wicked Good Cupcakes. Their business model was not proprietary, so they would have to count on effective marketing. Kevin rarely invests in non-proprietary business models. His concerns about competitive market spaces and the potential for another business to swoop in and steal away market share make non-proprietary models risky. He is usually unwilling to hand over cash for equity. The shelf life was also a major concern. Although the jars extended the cupcakes’ shelf life, it still was only seven to ten days. With at least two days’ shipping time, this left only around a week of buffer time for production, packaging, and consumption. This fact hit Lori the hardest. Most of her experience was on TV with non-perishable products. For that reason, she backed out.
For Robert and Daymond, there wasn’t as much concern with the business model itself. Robert prefaced his statement with “I’m not really a dessert guy.” He thought of Wicked Good Cupcakes as a potentially successful novelty idea, but with limited retail ideas, he didn’t know where to take the business. He left as well. Daymond had similar reasons for leaving negotiations. “I am a big dessert guy. And if I invest in this product, I will be a bigger and bigger and bigger dessert guy!” For the most part, it just wasn’t a space Robert and Daymond wanted to invest.
Earlier in the presentation, Mark joined Kevin in questions about Wicked Good Cupcakes’ margins. He wondered if they could scrap the mason jars, a large portion of production costs, but these were important to the product’s image. Along with this, he said that “cupcakes are super, scorchin’ hot right now,” echoing Kevin’s concerns about the competitive gourmet food business. Like Robert and Daymond, the business wasn’t an ideal fit for him, and questions over margins sealed the deal. Despite believing they could do great things, Mark bowed out.
“C’mon, Mr. Wonderful,” Danielle begged. “I have an offer for you. You may not like it,” he warned. Rather than asking for any equity, Kevin proposed a royalty deal. He offered seventy-five thousand dollars, in exchange for a dollar from every jar until breaking even. After this, he wanted fifty cents per jar in perpetuity. Royalty deals are perfect for small, family businesses. Generally, an equity investor looks for a well-developed exit strategy to make their money. Since Kevin didn’t see Tracey and Danielle selling off the business, royalties were a better fit. Hopefully, scraping together enough to pay back Kevin would encourage them to improve their margins. Seeing Mark and Robert’s skepticism, Tracey asked for some time to convene with her daughter in the hall.
“A dollar a jar? How much does that leave them with?” Robert asked, once Tracey and Danielle had left the room. “Practically nothing,” Kevin admitted, sparking a belly-laugh around the room. They couldn’t believe his gall. Meanwhile, Tracey and Danielle mulled things over. The idea of fifty cents per jar in perpetuity scared them, but they reentered the tank with no clear decision.
After Robert recapped Kevin’s offer, Mark and Lori had a few words of caution. They warned the Wicked Good Cupcakes team that an offer like this could cripple their business. They shouldn’t take the money now if they would regret it years down the road, when they were still losing fifty cents from every jar. Tracey made a counter-offer of forty cents per jar in perpetuity. Shark Tank and other sources actually offer conflicting information here. It is unclear if the forty cents in perpetuity was only in response to the second half of the deal or if it also denied Kevin the higher royalties of a dollar per jar until he made his money back. Nevertheless, Kevin countered at forty-five cents, and Tracey quickly accepted with “Come to mama!”
At the end of the day, Wicked Good Cupcakes’ success in landing a deal can be traced back to its simplicity. Anyone could understand the business and its appeal in seconds with the simple phrase “cupcake in a jar.” Tracey and Danielle also had the baking experience and authenticity. While some sharks expressed concern over product margins and shelf life, the team had still come prepared with this information. Time will tell if they begin to regret Kevin’s deal, but it should allow them to buy in bulk and ramp up production, which is what they came for.
Wicked Good Cupcakes After Shark Tank
Since Shark Tank, business has been good for Tracey and Danielle. They were able to open a second location in Boston’s iconic Faneuil Hall Marketplace. They’ve become a major job creator for their city, hiring forty employees. The “Shark Tank Effect” has been in full force. Before their appearance, Wicked Good Cupcakes had one hundred fifty thousand dollars in sales over nine months. In the first week after Shark Tank, they made two hundred thirty thousand dollars in sales. Projected sales for the year are about two million.
Kevin took the time to visit the mother-daughter team at their new location to celebrate. They’d already managed to pay him back his full seventy-five thousand dollars, and everyone was excited for the future. Donning his chef’s hat and apron, Kevin announced that he was selling cupcakes and did a little advertising. He may be ruthless, but having Mr. Wonderful attached to your company brings a lot of attention. According to Danielle, “When we first took the deal with Kevin, it pretty much felt like we were making a deal with the devil, but he’s like a little angel in disguise.” It may be first and foremost about the money for Kevin, but he has a heart, too. “When you back a successful entrepreneur and create forty jobs, you’re creating the new America! This is what it’s all about.”
Wicked Good Cupcakes Now in 2018 – More Sweet Success
Most Shark Tank success stories stop here, but for Tracey and Danielle, it was just the beginning. Kevin was still making forty-five cents on every jar and there was no end in sight. He wanted to stay with Wicked Good Cupcakes and use his connections to help them grow further. Good Grief Celebrations, appearing in season one of Shark Tank, was a flop with the rest of the judges, but Kevin liked the idea. For him, birth, marriage, and death offer the greatest business opportunities. People are completely irrational! Based on this, it made sense for Kevin to incorporate several of his Shark Tank businesses into a single wedding platform. The Something Wonderful platform was born.
Kevin O’Leary is actually licensed to marry, so he offered to officiate the ceremony of some close friends in Nantucket. However, he likes to “mix a little business with pleasure.” He invited Tracey and Danielle of Wicked Good Cupcakes, along with the people behind Bottle Breacher and Honeyfund to attend. Wedding guests would receive cupcake jars personalized with photos of the bride and groom, as well as their own Bottle Breacher vintage bottle openers. Honeyfund also set up a honeymoon registry for the couple. After enjoying the wedding ceremony, each entrepreneur comments on their success. Since partnering with Kevin two years before, Wicked Good Cupcakes has done five-and-a-half million dollars.
Kevin also has a few words about his plans for the Something Wonderful platform. With many businesses grown and sold behind him, he is always looking for ways to cooperate and form mutually beneficial relationships. He sees Something Wonderful as a way to share marketing and build an additional brand. Hopefully, it can strengthen its child companies and make a dent in the wedding industry. He sees Something Wonderful growing to hundreds of millions of dollars in the future.
In a nearly unprecedented move, we actually have a third official update from Wicked Good Cupcakes, this time from the spinoff miniseries, Beyond the Tank. The program recaps what we’ve learned so far about Shark Tank deals, but it also follows personal strategy sessions with the sharks afterward. In Beyond the Tank, Tracey hopes to earn Kevin’s blessing on a new line of products. She thinks that expanding the mail-order model and moving into retail stores are both logical next steps for the company. Despite his reservations about a lack of proprietary content, Kevin has admired their ability to turn Wicked Good Cupcakes into a gifting item. “How pure and simple. And how profitable.” Perhaps he’ll feel the same way about Tracey’s new ideas.
Before Kevin arrives, we’re offered an inside look into the business. As of Shark Tank’s first update on Wicked Good Cupcakes, they had hired forty employees. Now, they also have friends and family on the payroll. Danielle’s cousin, grandfather, and step-father are all lending their energy to the business. Her step-father, Scott, is now the CTO and CFO of the business after leaving a high-paying managerial position. Her grandfather is also a former executive, so a lot of business sense is powering the company. Tracey is grateful for how far the business has come and has some words of appreciation for Danielle, who has stayed by her side. “Gush, gush,” Danielle responds, with a smile.
Kevin arrives at the Cohasset, Massachusetts office of Wicked Good Cupcakes. After touring the facility and admiring the kitchen, where they still custom-decorate cakes for sale, he gets down to strategy. First they go over sales. The business has had geometric growth since Shark Tank, with two million five hundred thousand in 2014 and an estimated three million five hundred thousand in 2015. Kevin sees ten million in annual sales as the point when Wicked Good Cupcakes becomes a real national brand, and he sets his sights on three years out. Tracey, however, is worried that more of the same won’t keep the business afloat. She’s ready to announce her two new products.
The first is a Wicked Good Cupcakes dry mix. According to her, it tastes exactly the same as their regular recipe, and it’s an opportunity to expand into stores. With costs of a dollar and eighty-nine cents, she can produce a bag of dry mix. Tracey hopes that this will be the beginning of a line of mixes, frostings, and toppings. “You’re joking,” says Kevin. He hates the idea, saying that he can buy a basic box of cake mix already for a dollar fifty. With dry mix, Wicked Good Cupcakes would be taking on some very large companies that compete ruthlessly for shelf space. When asked when Wicked Good Cupcakes will be big enough to take on the Betty Crockers of the world, he simply answers “Not yet.” While Kevin has no real say in this decision since he doesn’t own equity, he strongly advises that Tracey put it aside.
The second product is a different story. After dipping cookies in chocolate with her niece for Christmas, Tracey decided that it might be a good addition to the Wicked Good Cupcakes line. Samantha’s Wicked Good Cookie Jar was born. Each cookies comes individually wrapped and is customizable. This bears great opportunity for corporate sales. The model also includes sales of the jars themselves. After an initial order, a buyer can purchase refills, reusing the jars. At twenty-four cookies per jar, repeat business is the aim.
It’s clear that Kevin feels better about this idea, comparing it to the PEZ candy dispenser. The shelf life is also a drastic improvement over earlier products, estimated at between six and nine months. Although there is some risk involved in buying a chocolate dipping machine if the idea fails, it’s a risk everyone in the room is willing to take. Kevin offers the greatest show of confidence available and promises that his own businesses will buy them. Samantha’s Wicked Good Cookie Jars should be a hit. A look at the Wicked Good Cupcakes website says something positive about either Tracey and Scott’s business sense or Kevin’s connections. Since the Beyond the Tank episode was aired, Wicked Good landed a deal with Cinnabon!
When all is said and done, we see Kevin mixing some leisure in with his business again. To celebrate the growth of Wicked Good Cupcakes and its new product, he pulls out an electric guitar and jams with the family in their basement. With Tracey on the drums, Scott on the bass, and Danielle and Samantha cheering them on, it’s a fitting conclusion to Shark Tank’s deepest story yet. Here’s hoping that Tracey and Danielle keep growing Wicked Good until it’s the national brand that they dream of.