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2017 Retailer of the Year: Sprouts Farmers Market

2017 Retailer Of The Year 2017 Retailer Of The Year
Celadrin

Recently called “the most attractive, high-growth retail assets today” by Barrons.com, fast-growing Sprouts Farmers Market keeps its focus on healthy living for less.

In July of 2002, Sprouts opened its first store in Chandler, AZ. Fifteen years later, the retailer has seen phenomenal growth—by the end of August 2017, Sprouts’ total store count will be 280, with more than 26,000 team members, and the retailer will be in operation in the following states:

1. Alabama
2. Arizona
3. California
4. Colorado
5. Florida
6. Georgia
7. Kansas
8. Missouri
9. Nevada
10. New Mexico
11. North Carolina
12. Oklahoma
13. Tennessee
14. Texas
15. Utah

So the question is, to what does Sprouts owe its success? In short, the answer is a healthy variety of fresh, natural and organic foods at great prices.

But there’s more to Sprouts’ story than that. According to Diana Lucas, vice president of Vitamins and Body Care, “The company’s founders recognized growing health trends and the opportunity to appeal to consumers by offering more affordable prices on healthy products, including a wide assortment of vitamins and supplements, in a welcoming shopping environment,” she said. “Since the beginning, Sprouts’ Vitamins and Body Care Department has been a destination for customers. With more than 7,500 top-quality products, this area of the store helps guests bridge the gap where eating falls short.

“At Sprouts, we don’t believe in a one-size-fits-all approach to healthy eating,” Lucas added. “The fact is, for many of our customers, even with a healthy diet, it is tough to get all of the vitamins and minerals needed for optimum health. Sprouts’ knowledgeable team members can help customers find the right products to meet their individual needs.”

Company History

Though the company marks 2002 as its official start date, the germination of Sprouts actually goes further back:

• In 1943, Henry Boney began Sprouts’ longstanding legacy of providing fresh foods at great prices at his fruit stand in San Diego, CA. Boney grew his business from one stand into a healthy grocery chain, later named Henry’s Marketplace by his family. The family sold the chain in 1999.

• In 2002, “Healthy Living for Less” was born when Stan and Shon Boney, Henry’s son and grandson, opened the first Sprouts Farmers Market in Chandler, AZ. The healthy grocery store featured abundant produce and a wide selection of fresh, natural and organic foods and grocery items at great prices. The chain would continue to expand over the next 10 years.

• In 2011, Sprouts merged with the chain that was now known as Henry’s with the help of Apollo Management, reuniting the Boney family business for the first time in 10 years. The Sprouts and Henry’s merger created one of the country’s largest natural food grocers with annual revenues in excess of $1 billion.

• In 2012, Sprouts acquired Sunflower Farmers Market, which operated 37 stores, expanding the healthy grocer’s presence to nearly 150 stores throughout eight states.

• In 2013, Sprouts became a public company traded on the NASDAQ Stock Market. Sprouts debuted with strong interest from Wall Street investors who saw the company uniquely positioned at the intersection of two of the biggest trends in America—health and value.

• In 2014, Sprouts began its Southeast expansion by adding new stores in and around Atlanta, GA. By this time, Sprouts was widely recognized as one of the top healthy grocers in America by Consumer Reports and other media outlets.

• In 2015, Sprouts opened stores in three more southern states, bringing “Healthy Living for Less” to more than 200 stores coast-to-coast. That same year, Sprouts launched a partnership with Amazon Prime Now to offer San Diego-area Prime Now members free two-hour delivery of more than 2,000 Sprouts items. The service expanded to the Orange Country, Los Angeles, Dallas, San Jose and Oakland areas over the next two years.

• In 2016, Sprouts introduced mobile coupons to the Sprouts app, making it easier than ever to save on Sprouts’ already low prices. The company further anchored its southeastern presence with a new distribution center in the region.

• In 2017, Sprouts continued its eastern expansion by adding stores in Florida and North Carolina, totaling 15 states in its 15th year of business.

Store Evolution

Since 2002, Sprouts’ healthy living for less model has focused on healthy foods, always including an entire department dedicated to vitamins and supplements. Sprouts pioneered the notion that healthy eating and supplementation should be available for all consumers, and began marketing healthy products like a conventional supermarket, Lucas noted.

“Early on,” she said, “it was clear that mainstream consumers were becoming interested in the benefits of healthy living. While Sprouts’ initial focus did skew more towards the fresh side of our merchandise assortment, Sprouts quickly began to add more frozen and dry grocery SKUs to serve as a full-service healthy grocery store. Sprouts was, and still is today, the ‘healthy living for less’ retail leader,” Lucas said. “We created a winning formula that appealed to consumers with quality products at a value.”

Lucas explained the store’s mission statement. “At Sprouts, we believe healthy living is a journey and every meal is a choice. We love to inspire, educate and empower every person to eat healthier and live a better life. This isn’t just a mission. It’s our passion.”

Growth and Profits

Sprouts is one of the fastest growing retail chains and plans to open 32 stores this year. The retailer has a long runway of growth ahead, with the opportunity to mature to 1,200 stores. Sprouts launched a significant expansion into the southeast with the opening of stores in Georgia, Alabama and Tennessee in 2015. In 2016, Sprouts experienced industry-leading sales growth. Net sales grew to more than $4 billion, representing 15 percent growth on a 52-week basis, and same store sales grew 2.7 percent. Sprouts reported net sales of $1.1 billion in Q1 2017.

According to Lucas, becoming a public company has allowed Sprouts to continue to grow while staying true to its values, which includes an entrepreneurial spirit that fuels the company’s exciting growth and innovation in products and operations. She noted that there are many leaders and team members who have been with the company since day one.

Sprouts’ Vitamins and Body Care Department carries more than 7,500 SKUs and continues to optimize its merchandising by showcasing the latest industry trends on its shelves. This is how the company has evolved. “We pride ourselves in being first to market with new and innovative items and continue to expand our Sprouts Signature selection found only at Sprouts,” Lucas said.

Standing Apart

According to the retailer, Sprouts was the first to successfully bridge healthy eating with value. “It’s what has separated the grocer from its competition since day one,” Lucas said. “From the beginning, Sprouts’ leaders realized that consumers, particularly those who shopped at conventional groceries, were seeking healthier food options without the high price tag or intimidation of some other brands. Sprouts created a farmers market look and feel that is instantly welcoming, approachable and affordable. No other brand offers what we do and has our growth potential. That is why when we enter new markets, shoppers line up for hours to experience the Sprouts difference,” Lucas said.

With fast growth comes challenges, but keeping focused on core values helps drive the store forward. “At Sprouts, the biggest challenge is making sure we stay true to who we are and what we stand for as we continue to grow,” Lucas said. “No matter how large the company becomes, the core goal is to ensure that Sprouts is delivering on its passion to inspire, educate and empower every person to eat healthier and live a better life.”

Staff, Education, Business Culture

As stated, Sprouts’ goal is to make healthy living affordable. That includes a cutting-edge selection of natural vitamins, supplements and body care products derived mainly from organic, clean, natural and ethically sourced ingredients.

“Responsible retailing, or being a good neighbor in the communities Sprouts operates in is a huge part of the healthy grocer’s business culture,” Lucas said. The Sprouts Healthy Communities Foundation supports nonprofit organizations that focus on health, education and nutrition. Sprouts’ ongoing partnership with Vitamin Angels raised a record $430,000 in 2016 to help at-risk populations gain access to life saving and life-changing vitamins and minerals.

“The Sprouts team is humbled to have the opportunity to partner with Vitamin Angels to improve the lives of so many children around the world,” Lucas added. “Our shoppers come to Sprouts with their healthy journey in mind, and this partnership allows them to make a significant difference in the journeys of those in need.”

As for the company’s team members, they are extensively trained and share a passion for health and helping others, according to the retailer. “Sprouts’ knowledgeable service is most evident in our Vitamins and Body Care department, where team members go through ongoing training and educational programs to make sure they can speak to the latest industry news and trends, and help our shoppers with everyday concerns,” Lucas explained.

In fact, customer education is a huge component of Sprouts’ model and helps the grocer bridge healthy foods with natural vitamins and supplements. “We have created very successful themed events and engaging programs to assist customers as they enter our department with the goal to make it less intimidating for those who may be new to the category.” The store’s Sprouts’ Essential 4 is a great example of this and helps customers feel comfortable with starting a vitamin and supplement routine, Lucas pointed out.

In summary, the Essential 4 program is designed to help shoppers become familiar with supplements. Consisting of multivitamins, omega-rich oils, probiotics and super foods, the Essential 4 is a simple, daily regimen that can help bridge the nutritional gaps where eating falls short. Shoppers will find convenient, pre-packed Essential 4 kits, or can choose their favorite brands with individual products marked as part of the Essential 4 program on the shelves.

Team Spirit

Team member education is also crucial to the retailer. Sprouts team members receive one-on-one training with their department manager or regional vitamin trainer, reviewing the Essential 4 program and a departmental overview. This is built on each month through targeted vendor-sponsored training for certain categories within the department. Each quarter, team members review industry updates, major programs and new product launches. And, each day, they receive on-the-floor training as vendor representatives bring in new products or discuss new ingredients. Because of the retailer’s focus on training and opportunities for career advancement, Sprouts promoted 15 percent of its workforce in 2016.

“We recognize that many shoppers may be starting a new diet or lifestyle, or may be looking to address a very specific concern, so it’s important for us to ensure we offer the support to help them make choices that are right for them,” Lucas said. “Our team members are a wonderful resource for customer education and can answer many questions and concerns. We have an abundance of resources available to customers, from literature to a proprietary database of information on natural solutions, so if there’s something our team members can’t answer right away, we can look into it with the shopper to make sure we find the right product for them. We have a variety of training venues that reach our team members coast to coast.”

Marketing/Social Media/Mobile Technology

In addition to everyday value across the store, Sprouts offers impressive promotional pricing through a weekly ad, monthly magazine, mobile coupons, Double Ad Wednesday, in-store promotions and more. More than one-third of the store is on promotion at any given time.

The company uses various social media platforms, including Facebook, Instagram, Twitter, Pinterest and LinkedIn to educate, empower and inspire followers by providing engaging content in the form of recipes, tips, tutorials and videos. Sprouts also uses social media to engage one-on-one with customers. Lucas shared that sometimes customer feedback can help the business make a decision, like carry a product or add a certain SKU from a popular brand. Social media listening has given Sprouts valuable insights into new and upcoming trends and topics that are relevant to its business.

“Streaming live on Facebook has been a valuable tool for the social media team at Sprouts, especially when promoting vitamins and supplements, as it allows product promotion and real-time engagement,” Lucas commented. “Sprouts is able to answer questions and educate fans about the different products they offer, as well as show creative ways to incorporate those items into their lifestyle.”

Sprouts partners with various vitamin and supplement brands on social media and is constantly developing creative ways to feature items in a fun and engaging manner. Sprouts has done Facebook Live with several vitamin brands, such as Vega, Gaia and MegaFood. During a Facebook Live, Sprouts will often give away a prize bundle to encourage participation. In addition to Facebook Live, Sprouts has partnered with vitamin brands on sweepstakes and contests across several social media platforms.

Sprouts also uses social media to publish videos and educational content surrounding its Essential 4 program. One video, What Herb Are You?, featured a personality quiz and ads on Facebook and Instagram to support the in-store Botanical Bliss promotion.

Customers can find instant savings on healthy products using the Sprouts app, which offers exclusive mobile coupons targeted to each customer and their home store. The app also features checkout challenges and promo codes that unlock special rewards. The Sprouts mobile app has on-the-go shopping resources for customers, such as Sprouts’ weekly specials flyer, a store locator and a shopping list feature. “Using the Sprouts mobile app, we have been able to deliver exclusive offers to customers who frequently purchase vitamins and supplements, as well as other attributes, which creates a more personalized shopping experience,” Lucas said.

Community, Environmental Support

Sprouts touches millions of lives each year through direct and in-kind donations, as well as volunteer support, to hundreds of nonprofits in each community it serves. In 2016, team members participated in more than 550 community events in neighborhoods from coast to coast.

The Sprouts Healthy Communities Foundation supports health and wellness-related causes that directly impact the stores’ communities. In 2016, the Foundation awarded 54 Neighborhood Grants to local nonprofit organizations and supported Vitamin Angels, REAL School Gardens and Autism Speaks with larger Impact Grants.

In addition, Sprouts donates all unsold but edible groceries to Feeding America and its local affiliate hunger relief agencies as part of the retailer’s Food Rescue program. A considerable amount of produce is also donated each day directly from the store’s distribution centers. In 2016, Sprouts donated more than 18 million pounds of food, or more than 15 million meals.

“All of our stores participate in a landfill diversion program that sends food that does not meet our donation standards to cattle ranches for animal feed or to composting facilities—diverting nearly 600 tons of food waste to date,” Lucas explained.

Future Goals

After Amazon.com announced the acquisition of Whole Foods Market, there was talk that Sprouts was next on the online retailer’s list of retailers to buy. While that remains speculative, Sprouts and Amazon recently expanded the two-hour delivery of groceries and fresh items to Denver, CO.

“Sprouts will continue to evolve in multiple ways as we actively listen to our customers and our team members to stay not just on top of trends, but ahead of them,” Lucas said. Here’s how:

• Sprouts is accelerating customer engagement across all touch points to drive brand loyalty. This includes a variety of digital initiatives, including personalization, on multiple platforms. These strategies complement Sprouts’ unique shopping experience and both attract new customers and enhance its relationship with current customers.

• In addition, there will be a continued focus on Sprouts Brand products, as they allow the company to grow its business in a deflationary environment. “In 2016, there was a 30 percent growth in Sprouts Brand sales, equating to more than 10 percent of revenue,” Lucas said. “Not only do Sprouts Brand sales continue to outpace the company average in both sales growth and comps, but the products offer one more way to drive loyalty with our customers.”

Jim Nielsen, Sprouts’ president and chief operating officer, concluded. “Sprouts continues to solidify our position as a leader in vitamins, supplements and natural body care through our expansive merchandise assortment and knowledgeable team members,” he said. “Our team continues to innovate in this area by providing a variety of on-trend items at great values for customers who view Sprouts as a trusted partner on their healthy living journey.” VR

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