Key Takeaways

• Sprouts Farmers Market has a long-term corporate vision of "building a brand that is good for you, good for your family, and good for the planet."
• The company achieved net sales of $4.6 billion, $5.2 billion, $5.6 billion, and $6.1 billion in 2017, 2018, 2019, and 2021, respectively.
• According to Scot Sinclair, CEO of Sprouts Farmers Market, in a report about the company's future and strategy said, "marketing inside or outside the store, we will highlight our differentiation in each category like our attribute-driven paleo, keto, and plant-based campaigns emphasizing digital shopping list and customer engagement around our buzz-worthy smaller brands. Our ultimate goal is to make our marketing dollars more efficient and effective and most importantly help drive traffic."
• Consistent armed robbery attempts and intense competition are two barriers thwarting the progress of Sprouts Farmers Market.

Introduction

Company Analysis: Sprout

• Founded in 2002, Sprouts Farmers Market is a grocery retail company that opened its first shop in Chandler, Arizona, offering "fresh, natural, and organic food products" to customers across the United States (US). Headquartered in Phoenix, Sprouts employs about 31,000 people across 380 shops in 23 states in the US.
• The company offers "fresh, natural, and organic food products" grouped under perishables (57.2%) and non-perishables (42.3%). Also, Sprouts offers department store settings, private labels, and curated differentiated product innovations.
• Sprouts Farmers Market has a long-term vision to "build a brand that is good for you, good for your family, and good for the planet." Sprouts Farmer Market aspires to "inspire healthy living for everyone."

 

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Financials/Revenue

• In 2020, Sprouts accrued net sales of $6.5 billion, which translates into a 15% increment from 2019 figures. Additionally, the company witnessed a 340% growth in e-commerce at the end of 2020, beating Wallstreet estimates.
• The company achieved net sales of $4.6 billion, $5.2 billion, $5.6 billion, and $6.1 billion in 2017, 2018, 2019, and 2021, respectively.
• According to ZoomInfo, Sprouts has concluded one founding round since its establishment, raising $333 million in total funds from July 2013.
• Beyond 2022, Sprouts "expect to begin targeting at least 10% annual unit growth, subject to the impact of supply chain disruptions which delayed a number of our new store openings in 2021."
• By the end of 2022, Sprouts expects a 4-5% net sales growth, 1-2% store sales growth, and between $2.18 to $2.26 adjusted diluted earnings per share.

 

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Recent Digital Strategies/Initiatives/Announcements

• In 2021, Sprouts achieved over five million customers through its digital expansion initiatives. The achievement extended the company's footprint in the delivery of healthy products.
• Sprouts has committed to improving data protection and security issues as it expands its digital footprint. Accordingly, the company continues to "invest in security protocols and best practices to strengthen security, and we maintain appropriate cyber insurance coverage. Investments in security technology tools include robust email filtration, endpoint protection, data loss prevention, and business continuity and recovery technologies."
• In June 2022, Sprouts partnered with Instacart to participate in the "Electronic Benefits Transfer Supplemental Nutrition and Assistance Program (EBT SNAP) for same-day delivery and curbside pickup orders" in all stores across the US. The EBT SNAP protocol will be rolled out on the company website later this year.
• Sprouts joined Pod Foods’ Distribution Network to leverage Pod's data-driven discovery capabilities to offer "130 Sprouts stores in the Southeast with immediate access to a virtual warehouse of emerging CPG brands, enabling the retailer to avoid supply chain delays and quickly stock the products that its customers want." The partnership gives Sprouts access to consumer demand and behavioral tracking capabilities for proper inventory management.

 

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Quotes Relating to Digital Strategy

• According to Scot Sinclair, CEO of Sprouts Farmers Market, in a report about the company's future and strategy said, "marketing inside or outside the store, we will highlight our differentiation in each category like our attribute-driven paleo, keto, and plant-based campaigns emphasizing digital shopping list and customer engagement around our buzz-worthy smaller brands. Our ultimate goal is to make our marketing dollars more efficient and effective and most importantly help drive traffic."
• As part of Sprout's partnership with Instacart, Nick Konat, President, and COO at Sprouts said, "Sprouts is a leader in making the highest quality fresh foods accessible to all. Online shopping for delivery and pickup offers our shoppers the accessibility and convenience to fit any lifestyle. Through this expanded partnership with Instacart, we can offer our customers the option to use their SNAP benefits when ordering their fresh and nutritious foods online, allowing them greater convenience, accessibility, and affordability."
• According to Crunchbase, Sprouts deploys about 82 technologies for its website and 42 technology products and services. Some existing marketing tech stacks are Google Analytics, HTML5, and jQuery. Sprouts uses SPF, iPhone / Mobile Compatible, and Viewport Meta for its website.

Corporate Challenges Faced by Sprouts

Consistent Armed Robbery Cases

•  Robbery attempts at Sprouts' shops have become consistent for several years, posing challenges for the brand and its customers. As a result, there are concerns about property losses and the safety of employees and customers.
• Since 2012, 2013, 2020, and 2021, there have been reported cases of armed robberies in Sprouts's shops in the US. For instance, in 2012 at around 1:20 a.m, the company's shop located at 1327 Encinitas Blvd experienced an armed robbery incident. In 2013, an employee of Sprouts Farmers Market was robbed at knifepoint on Geary Road, escaping with the victim's money.
• In April 2013, a shop manager at a Sprouts' shop at 20707 Kuykendahl Road in Spring, Texas, was shot during an armed robbery incident. Such cases cause fear and concern for the safety and security of employees and customers, impacting the business as usual in the company's shops.

Intense Competition

• Competition in the grocery industry is a tough space for many companies, including Sprout Farmers Market. The industry is made of numerous corner stores, convenience stores, supermarkets, and grocery stores, competing for market share. According to MBA Skool, intense competition is one of the threats to the progress of the company.
• Competition in the industry makes it unpredictable for companies to target customers with their product offerings to grow their market shares. However, Jack Sinclair, CEO of Sprouts Farmers Market, says "he is pleased with how Sprouts continues to navigate the current unpredictable environment" the company operates in.
• Additionally, new entrants in the industry build up pressure for the company to constantly innovate to keep up with the competitive environment. The company is in the web of introducing new strategies to maintain its position in the grocery space, attempting to reduce costs, setting lower pricing strategies, and new value propositions.
• Business Chronicler posits that Sprouts faces intense competition from companies like Trader Joe’s and Whole Foods. These industry dynamics present challenges and barriers needing strategic initiatives for Sprouts to maintain its competitive advantage in the grocery market.

Key Competitors to Sprouts

The Fresh Market

 

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• Website: https://www.thefreshmarket.com/
• The Fresh Market (TFM) was founded in 1982 in Greensboro, North Carolina, on Lawndale Drive. Currently, the company has about 160 stores in 22 states across the US.
• TFM prides itself as a "destination for those looking to discover the best, including convenient, restaurant-quality meals, hand-picked produce, premium baked goods, fresh-cut flowers, custom-cut meats, and carefully curated offerings for holidays and special occasions."
• Aside from its base in the US, TFM is the number one ranked company among top competitors of Sprouts Farmers Market, according to ZoomInfo.
• Additionally, TFM's operational footprint is similar to Sprouts Farmers Market in 23 states across the US. Like Sprouts, TFM offers specialty grocery products in line with the competitor's differentiated strategy. Thus, any digital transformation intervention is monitored by Sprouts.

Trader Joe's

 

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• Website: https://www.traderjoes.com/home 

• Headquartered in Monrovia, California, Trader Joe's is a national chain grocery retailer founded in 1967.
• Trader Joe's business strategy is in consonant with Sprouts' differentiated approach to delivering unique health-conscious products to consumers. According to Trader Joe's consumers will not "find a lot of branded items. Instead, you’ll discover a store full of unique and interesting products, along with everyday basics, in the Trader Joe's label."

• The company's current strategy offers "products to the sophisticated consumers, hire quality employees and to maintain smaller stores carrying their private label brand at everyday low prices" similar to Sprouts Farmers Market.
• Additionally, Trader Joe's is one of the top competitors for Sprouts Farmers Market, according to Zoominfo and the Business Chronicler. Thus, the company qualified for selection for this report.

Whole Foods Market

 

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• Website: https://eu.wholefoodsmarket.com/ 
• Based in Austin, Texas, Whole Foods Market has over 500 retail shops across the US, Canada, and the United Kingdom, selling the "Highest Quality Natural and Organic Foods." Following its acquisition by Amazon in 2017, the company has been outperforming most of its competitors in the grocery industry.
• Like Sprouts and Trader Joe's, Whole Foods Market is a leader in the health-conscious grocery retail industry, gaining recognition as the "mecca for healthy eating enthusiasts."
• According to Business Chronicler, Sprouts Farmers Market and Trader Joe's are the company's top two competing companies in the grocery retail industry. Additionally, ZoomInfo cites the three companies among each of the company's top competitors.

Research Strategy