Sprinkles Cupcakes: A Case Study of Creating a Successful Internationalization Strategy

The Birth and Growth of the Sprinkles' CupcakeDuring a visit in 2002 to New York City, Candace Nelson, and her husband Charles Nelson, tried the cupcakes at a well-known bakery. As Candace explained, "I get the cupcake thing - cupcakes are awesome, but the cupcakes aren't that great." Candace believed that it was "time for cupcakes to stop being the backup dancer to cakes," and that cupcakes "could taste so much better." Candace and Charles took it upon themselves to create a better cupcake, and over the next two years, the couple developed over 20 cupcake recipes. (Cava, 2007)The decision to start a cupcake bakery was a high-risk venture; especially since the bakery business was in a four-year decline in the U.S. Despite the odds, the Nelsons pursued their dream. In April 2005, the Nelsons opened the first Sprinkles store on Little Santa Monica Boulevard, in Beverly Hills, California. On their first day of operation, the cupcakes sold out in just one hour, and in the first week, the Nelsons sold over 2,000 cupcakes. Based on this success, the Nelsons quickly decided to open more stores. (Davidow, 2007)The Nelsons wanted their stores to reflect a sophisticated image, so they sought out an architect from Vienna to design Sprinkles' "sleek, minimalistic" storefronts. The company's modern theme is carried through to its logo and packaging, which were created by a former Martha Stewart employee (see Exhibit A). In fact, the company's cupcakes are most recognizable by their traditional "modern dot" topping. Candace Nelson hand-crafted her cupcake recipes by using the highest quality ingredients including sweet cream butter, bittersweet Belgian chocolate, pure Madagascar vanilla, fresh bananas, carrots, real strawberries and natural citrus zests. All of the cupcakes are baked fresh daily, in small batches, and contain no preservatives, trans fats or artificial flavors. Sprinkles has a "sophisticated" take on the classic cupcake and even sells specialty offerings like vegan and gluten-free cupcakes and dog-food cupcakes.Since 2005, the Nelsons have expanded their cupcake business into twelve U.S. locations. In 2011, the company entered into a franchise agreement with M.H. Alshaya Co. - the same company that has helped brands like Cheesecake Factory and Starbucks expand internationally - to help them expand into the Middle East. Sprinkles' first international store opened in Kuwait City in December 2012. In the coming years, the company plans to open stores in 15 more cities, including London and Tokyo. (Craig, 2013)More than One Way to Eat a Cupcake: Current ProductsAs of 2013, there are four options for customers to purchase these high-end cupcakes: the traditional retail storefront in 12 locations, a mobile cupcake truck, a cupcake vending machine, and cupcake mix sold online and in stores. In the retail cupcake stores, flavors are rotated throughout different days of the week, along with seasonal offerings. Sprinkles cupcakes are a premium product, with single cupcakes priced at $3.75 and a dozen priced at $42.Stores are located mainly on the West coast: Beverly Hills, Los Angeles (2), Newport Beach, Palo Alto, and La Jolla. Other branches are in Chicago, Dallas, Houston, Scottsdale, New York City, and Washington, D.C. The interior of the store has been fashioned as a "bar" setting. The store is set up to "[evoke] the memory of European bakeries flooded with the smell of baked goods and awash in natural light." (www.sprinkles.com/about/design) Patrons are encouraged to sit and stay in the store to enjoy their cupcakes. About 1,500 cupcakes are sold in every retail store every day.Sprinkles has a mobile cupcake truck in California, known as the Sprinklesmobile. The company uses social media, such as Twitter, to let customers know where the truck is located for the day. It is set up in high traffic areas and at public events and festivals around Los Angeles. The truck only stays in each location for four or five hours at a time. …