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Marketing Mix Podcast with Candace Nelson

Candace Nelson talks experiential marketing and her thinking behind the world-famous cupcake ATM

December 12, 2018

Joining us on the Marketing Mix Podcast is Candace Nelson, Founder of Sprinkles Cupcakes and Pizzana. Candace reveals her thinking behind the world-famous cupcake ATM, the impact of celebrity advocacy and the evolution of UGC in product marketing. With new business ventures underway, Candace talks through barriers to international marketing and how to stand out from the crowd.

Listen to "Candace Nelson, Founder, Sprinkles Cupcakes and Pizzana" on Spreaker.  

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Jeff Ragovin: Before you opened Sprinkles with your husband, you were an investment banker by trade. Can you tell me a little more about that transition?

Candace Nelson: I was a financial analyst right out of college and I was doing a 2 year program in corporate finance and crunching numbers into the wee hours of the night. I didn’t really have a great role model, looking up the ranks at the VP levels, there weren’t many women! So I thought that, A. I’m not sure I really like this, and B. I’m not really sure I’m cut out for this, and I don’t really have anyone to help me get to that point. So it was actually the heady dotcom days of the late 90s, and a lot of people were jumping ship from their traditional jobs to go make their millions with these dotcom startups. So I thought, “What the heck, I’ll give that a try!” So I ended up at Snap.com for a couple years, and then bottom dropped out from the internet world.

So, you know it was a challenging time for me that ultimately became an opportunity for me; because instead of going to business school, which would be the natural next step, I ended up going to pastry school. I sort of had enough of these jobs where I wasn’t feeling the passion, or I wasn’t feeling the love. What I realized was we spend most of our waking hours working, so it’s important to do something you like! So I went to pastry school to sort of test my interest, because baking had always been a hobby, but would I really love to do it if I had to wake up at the crack of dawn everyday? And what I realized was, I really loved it. So marrying my interest in business and my interest in baking, I came up with a bakery idea.

I started baking these special occasion cakes out of my house, and selling them to friends, and friends of friends. And what I realized about special occasion cakes was that they were a lot of work, and that frankly, people in this country don’t really buy special occasion cakes that much, because they are by their very nature, for special occasions only. And I wanted to make something from a business perspective, but also from a fulfillment perspective that people could eat and enjoy on a daily basis.

At the time, you would still only find cupcakes at supermarkets, they were 50 cents at your local grocery store, packed in plastic clamshells. So I thought, “What if I elevated the cupcake, and treated them with the same care as I did these special occasions cakes? What would happen then?” So I started churning out these cupcakes and realized I’d hit on something.  

Jeff Ragovin: Where did this idea of an ATM cupcake machine come from?

Candace Nelson: The key to any business is innovation. And with the idea behind Sprinkles, although it seems simple now since there are cupcake bakeries everywhere, at the time it was considered a crazy idea. No one had done a cupcakes only bakery before, and you have to ask yourself, “Is there a reason for that? Maybe it just doesn’t work!” So the actual idea for Sprinkles was quite an innovative idea, although again, now it seems so simple. Once we were open we realized that success breeds imitation, and there were cupcake shops popping up all over the country. So it was time to think about, “What’s next? How do we move the needle again?”

It actually happened quite accidentally. I myself quite love cupcakes, and the Sprinkles Dark Chocolate cupcake got me through both of my pregnancies. I was pregnant with my second son, and I really had a craving for a Dark Chocolate cupcake, which couldn’t be satisfied because we were closed. I had a moment where I thought, “This is ridiculous! I own a cupcake shop and even I can’t get a cupcake.” This was a very basic need and craving that had to be fulfilled, so my husband and I started batting around this idea that, “What if you could get a cupcake late at night? What would that look like? How could you do that?” You know, as a retail business we pay rent 24 hours a day, so why wouldn’t you want to monetize your business 24 hours a day? So we kind of hit on this idea of this ATM, and people coming out of the clubs in Chicago at 4 in the morning could get a freshly baked cupcake. That’s pretty cool.

Jeff Ragovin: Now that you’ve established Sprinkles in a global way, you’re onto something new, Pizzana, that you launched last year. Tell us more about that.

Candace Nelson: So Pizzana is my new venture, and it’s neo-Neapolitan pizza. Basically, what that means is myself, my husband and our chef partner, Danielli Uditi have taken a centuries old tradition, which is Neapolitan pizza, and modernized it. We’ve brought in the American taste to make the pizza very special and steeped in tradition, but modernized to today’s taste. In other words, Americans like handheld pizza, they want to be able to hold a slice of pizza and eat it. However, traditional Neapolitan pizza is very soupy in the middle, you have to eat it with fork and knife.

So the dough is fermented over a couple of days. The starter our chef uses is literally generations old from his grandfather. The flour is stone ground, whole grain, sprouted flour from Italy, it’s all very artisanal and special. But it’s crisp and baked in a wood fired oven at a slightly lower temperature so it can cook for longer. You can pick up a slice and the toppings don’t all fall off. So these are all the things I geek out on. Hopefully my customers just sit down and eat a great slice of pizza and they’re not thinking about it, but there’s a lot of thought that went into it.

Jeff Ragovin: You’ve done a lot of experiential marketing with Sprinkles, do you have any creative ideas for Pizzana?

Candace Nelson: We’re basically just over a year and a half in, and running a restaurant has had its own learning curves because although it is food, the experience has been very different from Sprinkles. We’re really happy about having had a successful first year, we made Jonathan Gold’s 101 restaurants list and really establishing a reputation as destination dining in Brentwood, which really is kind of a sleepy neighborhood of Los Angeles, and not really known for its dining. So I’m taking a deep breath.

The innovation truly is in the product itself, and the idea truly that it’s important to be elevating these things that are historically known as comfort foods, and making these foods we love easier to love because they’re actually sourced beautifully, they’re created artisanally, and they’re packaged beautifully as well. Elevating something that we have typically taken for granted is what it’s about. More innovation will definitely come, but right now it’s all about serving that quality product.

Jeff Ragovin: In one of your interviews, you talked about how when you first opened the Sprinkles bakery, people would come in and take pictures of everything in there, which was problematic from the point of view of copycats. How useful would you say is user generated content for you today?  

Candace Nelson: If it had been today and not 2005 when people were coming in there with their cameras, it would have been a whole different story. But we didn’t have Instagram back then. And so if someone would come in with a major camera and start taking detailed pictures, it wasn’t because they were spreading the word about Sprinkles. I would’ve been thrilled about that!

Now user generated content is critical, it’s all about trust these days and in particular millennials are skeptical about advertisers and rightfully so. So they want to buy from people they like, they want to buy from people they know. They want their girlfriend to tell them what they should be buying, and that’s where the micro-influencer comes in and that’s why you guys are so amazing! Today, certainly bring your phones to our bakeries today and take as many pictures as you want.

Jeff Ragovin: At the Newport bakery, Oprah visited and became a big fan of your cupcakes. I believe she even brought you to her show with the product?

Candace Nelson: Our cupcakes were on the show and my husband and I were on the red eye all night so that we could hand-carry the cupcakes so nothing would go wrong. We were backstage, we saw Oprah come in at 4 in the morning to get her hair and makeup done, we saw her come out, she gave me a high five. I wasn’t actually on the show, but I couldn’t have cared less because she ate them, and she had been gifted them by Barbra Streisand. So not only did we have Oprah Winfrey talking about our cupcakes, but it was Barbra Streisand who had introduced her! It was this incredible double whammy, and a life-altering moment for sure.

Jeff Ragovin: You’ve got many more locations now, and you’re expanding into the Middle East too. Any challenges there?

Candace Nelson: So there can be no alcohol in any of our products, but vanilla extract has trace amounts of alcohol, and vanilla extract is in every single one of our products. There are ways to work that out, and we did. There are so many things that we just take for granted. We had to completely re-do all of our recipes. Every adjustment will take you a little bit further from the original, but not enough to make a difference. Most of these Middle Eastern customers have come to the Beverly Hills store. They have very sophisticated palettes, and they know exactly what a Beverly Hills Sprinkles cupcake tastes like. So it has to taste the same.

We haven’t gone to Asia yet, but we’ve been told that because our design aesthetic is so special at Sprinkles, and at Pizzana, we would do very well in Japan. But we will have to reengineer the frostings because they will be too sweet for the taste of Japan. So there are so many things that we have to think about, so for us the priority has been expanding nationally more than internationally, not to say that it will not happen on a larger scale.

Jeff Ragovin: So when you look back at your lifetime, did you think this would happen in a million years? That you would build an empire around cupcakes?    

Candace Nelson: Oh absolutely not! Talk about having no models in investment banking, I really had no models for success in the baking world. I couldn’t possibly imagine making a living baking. The only model I would say I had was Mrs. Fields. Mrs. Fields was a rockstar back in the 80s and I grew up with her chocolate chip cookies and they were incredible! But it had been a long time since then.

I grew up internationally. My dad had a job that took us all over Southeast Asia, so when I was in grade school, I was living on the island of Sumatra in Indonesia. So if I had a craving for a treat from my homeland, in other words a chocolate chip cookie, a rice krispy treat, a brownie cupcake, I couldn’t get that at the corner store or the bakery, I had to make it myself. So I spent a lot of hours in the kitchen baking alongside my mom and it became something that I love to do and it was my connection to my home. Traditional American treats for me have always held a very significant place in my heart.

I do think what I did, anyone could’ve done. I didn’t have any “special” skills. Sure, I went to pastry school, but I didn’t have to go to pastry school to learn how to make a cupcake. I haven’t even had an internship in the bakery world, my husband and I really had to learn it from the ground up. And I think there’s something so special in doing that, we weren’t taking legacy systems from our years and years in the food industry, we were making up our own. So Sprinkles has always had a very special corporate culture that is unlike a lot of other businesses in the food world, and I think that’s a strength.

Jeff Ragovin: Thank you for joining the Marketing Mix Podcast. 

Please note, the above has been paraphrased for editorial purposes