Sprouts Farmers Market Named Retailer of the Year
Innovative Retail Strategies
Last year, Sprouts Farmers Market CEO Jack Sinclair walked onto a stage at the National Retail Federation’s Big Show in New York City and gave everyone in the audience the recipe for the retailer’s secret sauce:
“It’s very important for us to have the curation and differentiation that allows us to have that appeal to a customer that you can’t buy elsewhere. A lot of the investment from the digital world that’s moving into the physical world is based on having an assortment that everyone can access. Our aspiration is to be a great, curated organization so that people can only get what they want at Sprouts.”
That recipe for success has proved to be a big hit with shoppers.
Fast-forward to 2024, and Sprouts Farmers Market can’t seem to open stores fast enough as the retailer attracts scores of young families and consumers hungry for a simplified yet curated shopping experience that offers the right products at the right time and price, with a big focus on fresh. It’s why Sprouts was selected as Progressive Grocer’s 2024 Retailer of the Year.
“Sprouts Farmers Market is honored to receive Progressive Grocer’s Retailer of the Year award, a reflection of the dedicated people, culture and values that define our organization,” says Sinclair. “This achievement would not be possible without the commitment of our more than 33,000 team members across the country, who work tirelessly to care for our customers and deliver an exceptional shopping experience every day. As we expand to new markets across the country, we will stay true to our roots of fresh produce and healthier products that inspire our customers to live and eat better and enrich the communities we serve.”
Runway for Growth
Borrowing from its farmstand heritage, Sprouts aims to offer a unique grocery experience featuring an open layout with fresh produce at the heart of the store. Sprouts wants to attract the wellness shopper with a carefully curated assortment of better-for-you products. The healthy grocer is focused on sourcing the latest in wholesome, innovative products made with lifestyle-friendly ingredients offering such attributes as organic, plant-based and gluten-free. However, Sprouts is managing to attract not just the health-minded shopper, but also the traditional grocery customer.
Based in Phoenix, Sprouts today is one of the largest and fastest-growing retailers of food in the United States, with annual sales of $6.8 billion in 2023. It employs approximately 33,000 team members and operates more than 430 stores in 24 states nationwide, with a long runway of growth ahead.
In 2023, Sprouts, which previously had been operating formats spanning around 30,000 square feet, opened 30 stores debuting a new smaller format of around 23,000 square feet, featuring innovation tables, self-checkouts, and reimagined deli, frozen and meat departments. These features are designed to make it easier for customers to find new and unique products, according to the company. So far in 2024, Sprouts has opened 35 stores as it continues to expand into new and existing markets, from California to Florida and the Mid-Atlantic. Since the pandemic began in 2020, the company has opened more than 106 new stores.
In its latest earnings report, published in late October, the retailer surpassed expectations. Sales at Sprouts during its third quarter increased by 14% compared with the third quarter of 2023, including an 8.4% increase in same-store sales, while diluted earnings per share grew by 40% from last year.
“We are driving robust traffic growth and continue to execute at a very high level,” Sinclair said when the report came out. “We remain confident in our long-term growth potential.”
Also in the third quarter, total sales were $1.9 billion, up $232 million from the same period last year.
“Our comp was split fairly evenly between traffic and basket, and we saw a strong traffic comp both in store and online,” said CFO Curtis Valentine during the company’s earning call.
Sprouts began offering grocery e-commerce services in 2015 and now provides delivery and pickup at all locations through its website, powered by Instacart, Uber Eats and DoorDash. Sprouts’ e-commerce sales have grown 36%, representing 14.5% of total sales. The retailer’s online assortment serves as an extension of its in-store offerings, providing customers convenient access to a variety of healthy choices, whether fresh or dry grocery.
“The consumer’s pivot toward food at home and a growing focus on healthy living are bringing additional customers to Sprouts,” Valentine added during the earnings call.
According to a recent report from Santa Cruz, Calif.-based research firm Placer.ai, Sprouts’ foot traffic during its third quarter increased by 8.1% year over year, and the average number of visits to each location was up 2.6%. Additionally, during September, visits were up 8.1% year over year, and they were also up 8.5% in August and 7.9% in July.
Sprouts opened nine new stores during Q3. The company has nearly 110 approved new stores and more than 70 executed leases in the pipeline for the years ahead.
“We are more committed than ever to making healthier options available to our customers in as many communities as possible,” Sinclair said this past September.
The retailer expects total sales growth to be approximately 12% for the full year and comp sales to be approximately 7% in fiscal 2024. For the full year, Sprouts anticipates capital expenditures to be between $205 million and $215 million. The company plans to open 33 new stores instead of the previous guidance of 35, after deciding to delay two store openings in Florida, due to the impact of Hurricane Milton, until the first quarter of 2025.
“We acknowledge that we have some macro tailwinds at our back, but we are putting in the effort to establish a strong foundation that will enable the business to thrive in every environment,” explained Sinclair. “Our third-quarter results and overall momentum continue to confirm our belief in our target customer-focused strategy. … Our results enable us to keep investing in our growth. We’re enthusiastic about the opportunities ahead, and our teams are rising to the challenge.”
Sprouts’ robust financial performance in 2024 — with strength in same-store sales, traffic, e-commerce and merchandising innovation — showcases its momentum and potential in the grocery sector in the years ahead.
Find Your Healthy
According to Sprouts, it works to make sure that the shopping experience remains elevated in a world of new operational challenges by focusing on the needs of its core customer: Sprouts shoppers are really into their food. In fact, the Sprouts website urges them: “Find your healthy.”
Sprouts’ core customer is looking to make healthy choices (for example, produce represents 20% of sales at the company) and experience new things that align with their unique diets (more than 70% of Sprouts products are attribute-driven). They’re also highly engaged and connected to their food and how they shop for it.
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The company remains committed to a smaller format built to provide shoppers with a simple, intuitive store that delivers a true treasure-hunt shopping experience, full of fresh, unique and local products.
In-store, Sprouts offers a bright and airy farmers market experience with an open layout, community feel, personal connections, and produce always at the heart of the market. Signage next to local and unique products promotes value through storytelling.
As an example of its better-for-you focus, the company has refined its plant-powered proteins offering as a destination, and a “New For You” innovation center showcases the latest products exclusive to Sprouts. In fact, the retailer puts niche brands first and has grown many mom-and-pop companies into national brands. The innovation center is updated frequently to deliver the newest and most original products to surprise and delight shoppers.
“Our ongoing innovation efforts continue to be a differentiator for us,” asserts Sinclair. “This year, over 170 new items have transitioned from our innovation center to our inline shelves. As Sprouts is becoming a vendor of choice for new trend-forward brands, our foraging team also continues to explore new tastes and trends from across the globe, [going] from trade shows to restaurants for inspiration.”
This innovation extends to the frozen department, where Sprouts has added more than 115 new items that are leaders in natural and organic innovation. The retailer has also vastly expanded its grab-and-go options and prepared foods such as fresh-baked bread, meal-prep items, soups, salads, sandwiches and other fresh products.
“We’ve taken advantage of the consumer’s pivot back towards food at home by increasing our meal solutions across our fresh and frozen departments, with items like our grass-fed beef, stuffed peppers, black garlic marinated NAE [no antibiotics ever] chicken skewers and our organic grass-fed meatballs,” says Sinclair. “These unique natural products you can only find at Sprouts, and they lead our category growth.”
Sprouts offers approximately 200 SKUs of nuts, seeds, candies and grains, which are resonating well with shoppers who care about value and reduced packaging.
The retailer is currently testing a loyalty program in two markets, with plans to extend to more markets in early 2025.
“Our new loyalty program will be our data acquisition engine for personalization efforts,” says Sinclair. “While still early, we’re pleased with the progress we’re making and the learnings we’re gathering from our loyalty test. Signups and scans are meeting and even slightly exceeding our early goals. We plan to extend this test to a couple more markets in early 2025 to accelerate our learnings that will inform our rollout later in 2025.”
Right now, through the Sprouts app, shoppers can get exclusive offers, clip digital coupons, view the weekly ad, and order groceries for pickup or delivery. App users are also the first to hear about exclusive offers and get the weekly ad early on Tuesdays.
Another area that plays a key role in the Sprouts customer engagement strategy is social media. As a result of new social marketing efforts, the retailer is seeing more new customers, improved customer retention and increased shopping frequency, leading to strong comp traffic momentum.
“Our team has brought our unique assortment and experience to life and has found willing partners with many influencers and celebrities, whose products and purposes align with ours,” observes Sinclair. “What is even more encouraging is seeing authentic posts from our customers, sharing their experiences in-store and with our products.” According to Sinclair, the retailer is also seeing younger customers in its stores.
“That 18-to-34 cohort is one of the ones where we’ve seen the strongest growth,” he affirms, “and I think that’s a credit to our marketing team and the work they’re doing in social media and bringing in those younger customers. We’re pleased with where we’re headed there. To further support our long-term customer engagement, we’re investing in technology to build a customer data foundation to tailor and personalize our customer communications.”
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To meet the needs of its health-conscious customers, Sprouts is always growing its assortment of differentiated products. The assortment at Sprouts is curated to cater to the company’s “health enthusiast customers.” To highlight a few examples, the retailer is always looking to expand its range of organic produce, which is experiencing faster growth than conventional produce. Organic produce now comprises more than 46% of total produce sales at Sprouts.
Another focus is store brands, which contributed 23% to total sales for the latest quarter. Sprouts offers thousands of items from its private label Sprouts Brand, more than half of which are non-GMO or organic. From everyday staples to innovative specialty items, Sprouts Brand products meet strict quality standards while delivering value, novel flavor profiles and quality. The company often customizes flavor profiles and refines ingredients to suit Sprouts’ standards for quality, taste and value.
“Our Sprouts brand continues to grow and gain affinity with unique items and attributes that our customers desire,” notes Sinclair. “We have released more than 300 new Sprouts brand items this year, such as Italian-made stock gnocchi, frozen risottos sourced from Italy, and our latest Moroccan and al pastor-flavored chickpeas.” Most recently, it launched a line of more than 130 premium body care and home fragrance items under the Real Root by Sprouts brand.
“We’re very excited about the launch of Real Root by Sprouts,” says Sinclair. “They’re free from many things, including parabens, phthalates, [and] artificial fragrances and colors. These products help customers live healthier, nurturing inner and outer well-being.”
To showcase its differentiated products, Sprouts held several in-store experiences throughout the third quarter. In July, it debuted the first Sprouts Brand Discovery Days, during which customers explored the latest trends and new better-for-you products. Additionally, the retailer’s back-to-school event focused on healthy school snacks and lunch offerings.
Building “Sprouties”
Sinclair says that keeping customers happy starts with keeping employees happy, and the company is working hard to do just that.
“We’ve worked hard to create a culture that attracts, develops and retains top talent, building ‘Sprouties’ for the long term,” notes Sinclair. “We recently held our annual SproutsCon conference, which brought together all our store managers and various department managers, with over 1,600 team members in attendance. During the event, the operations team learned about our business initiatives, received leadership development training, and were introduced to new products in our innovation pipeline, some through live vendor pitch slams.”
More than 1,500 vendors attended the private show to discuss their products, allowing each team member to bring back their knowledge to the stores and share it with their customers and fellow team members.
“Our HR teams are focused on coaching and leadership training this year to build new leaders and our talent engines to support our growth objectives,” says Sinclair. “They’re doing a great job.”
In 2023, Sprouts created 3,000 new jobs, promoted more than 20% of its team members and filled 64% of store manager positions with internal candidates. It also provided 800,000-plus training hours across the business.
The retailer will continue to prioritize workforce diversity — 54% of 2022 promotions were female and 48% ethnically diverse, and VP-plus roles are 21% female and 16% ethnically diverse — building careers by providing development opportunities via investment in training and internal and external leadership education programs, and offering competitive entry wages, robust benefits and mental health support.
On the ESG front, the retailer is working with a top consultant on developing carbon reduction targets; focusing on selling products with lower carbon impact (i.e., plant-based and organic), building smaller stores and placing them closer to distribution centers (88% are within 250 miles); employing energy management options (LED lighting, CO2 and lower-GWP refrigerants); and exploring renewable-energy programs (on-site solar and off-site renewable projects).
“Our operations team is laser-focused on delivering exceptional customer service and an in-store experience that fosters long-term loyalty,” says Sinclair. “This commitment to bringing our unique products to life through exemplary service, engaging sampling and in-store execution continues to set us apart and win customers.”
