To make the cupcakes: Preheat the oven to 350ºF/180°C. Line a 12-cup muffin tin with cupcake liners.
In a medium bowl, combine the flour, baking powder, and salt. Using an electric mixer on medium speed, cream the butter and granulated sugar together in a large bowl until light and fluffy, about 5 minutes. Add the eggs, one at a time, and beat until combined. Add the vanilla and mix until incorporated. Reduce the speed to low, add one-third of the milk, and mix until combined. Add one-third of the flour mixture and mix until combined. Repeat, adding the milk and then the flour mixture, two more times. Mix the batter for 1 more minute, until completely combined.
Fill each cupcake liner with the batter until it’s about three-fourths full.
Bake the cupcakes for 15 to 17 minutes, until a cake tester inserted in the center comes out clean. Let the cupcakes cool for 10 minutes in the tin, then transfer to a baking rack to cool completely.
To make the frosting: Using an electric mixer on medium speed, beat the butter in a large bowl until fluffy, about 5 minutes. Add 1 1/2 cups (150 grams) confectioners’ sugar and mix until incorporated. Add 1 tablespoon milk and mix until incorporated. Repeat, adding the remaining 1 1/2 cups (150 grams) confectioners’ sugar and the remaining 1/2 tablespoon milk. Add the vanilla and beat the frosting for 5 minutes more, until light and fluffy. If the frosting is too stiff, add ½ tablespoon of milk, until it is spreading consistency. If the frosting is too thin, add more confectioners’ sugar, one tablespoon at a time, until it is spreading consistency.
Move 2 tablespoons of frosting to a small bowl. Add 2 or 3 drops red food coloring and stir together until uniform in color. Add 5 or 6 drops green food coloring to the remaining frosting and stir together until uniform in color.
To frost and decorate the cupcakes: Frost one cupcake with the red frosting for the caterpillar’s head. Press the yellow M&M’s into the center of the cupcake to make the eyes. With a toothpick, place a small bit of frosting onto each yellow M&M and then top each with one green M&M, so that they look like pupils. Press one chocolate chip below the eyes to make a nose. Frost the remaining 11 cupcakes with the green frosting.
Arrange the cupcakes into a caterpillar shape, with the red cupcake at one end, followed by the green cupcakes in an up-and-down curve pattern. Add chocolate chip feet to the bottoms of the green cupcakes. Bend the chenille stem into antennae, cut to desired length, and stick into the red cupcake at the top, above the M&M eyes. Be sure to remove the stem before serving.
This recipe is excerpted with permission from <a href="http://amzn.to/1SQ0VO6">"The World of Eric Carle: The Very Hungry Caterpillar Cookbook & Cookie Cutters Kit"</a> (Chronicle Books).