“We still have plenty of work to do to realize our five-year vision to double the size of our business, but I am more convinced than ever of our potential,” after seeing third-quarter sales increase 9.5%, comp sales climb 4.2% and e-commerce outpace that of most others in the industry with a 337% increase, CEO Jack Sinclair told analysts earlier this week during the company’s third quarter earnings call.
While recognizing that the coronavirus pandemic has financially benefited Sprouts Farmers Market and allowed it to “fast forward certain aspects of its [five-year] strategic plan,” Sinclair also attributed the retailer’s early success to innovative product launches, a new branding campaign and the rapid rollout of omni-channel offerings as part of its broader five-prong, five-year plan to improve its positioning.
Sinclair also acknowledged the contribution of the retailer’s essential employees “during this never-ending pandemic for providing services to our communities, taking care of our coworkers and delivering strong results to our shareholders.”
‘Innovation seekers are looking for taste & credibility’
A potentially risky, but key component to Sprout’s growth is to target and better meet the needs of the health enthusiasts and innovation seekers, who make up the retailer’s core consumer base, and who Sinclair says he will pursue even if it means potentially sacrificing some value-oriented shoppers.
“As we speak, we are working through a deep dive of all our categories to understand the needs and wants of our target customers, and ensure that innovation pipe engine is primed to bring even more new innovation branded and private label offerings to every department in our store,” Sinclair said.
He added, in 2020 the company already has launched more than 3,500 new and unique products “focused purely on innovation and taste” preferences of the retailer’s “desired customer base,” including seasonal hatch chili items, chips that are grain-free, paleo and vegan-friendly, a private label vegan matcha latte protein powder, Remedy Organics’ cold brew coffee with MCT oil and other “differentiated plant-based, keto and private label” products. The retailer also is exploring how best to develop a meal program.
Overall, Sinclair said, “innovation seekers are looking for taste and credibility from the retailer themselves… and we are going to be very different in those spaces and the format going forward.”
With these values in mind, Sinclair said Sprouts Farmers Market also has restructured its produce buying department to bring in new and innovative products, including new varietals before they become commoditized, such as an organic honeynut squash – the quantities of which are too low for many lot chains but which offer a “treasure hunt item” for select Sprouts’ stores.
The retailer also is improving its produce selection with the addition of two new distribution centers in Colorado and Florida in 2021 that will allow it to more quickly deliver produce for a fresher presentation.
New branding focuses on farmers’ market experience, innovation
Sprouts also is more aggressively courting its core consumer through a multi-media marketing campaign launched in August with the tagline: Sprouts where goodness grows.
“The campaign, which includes our first mainstream commercial on farm fresh goodness, drives home our farmers’ market experience, by highlighting produce as the heart of our store, and inspires health enthusiasts and experience seekers to engage with our brand,” Sinclair said.
So far, he added, the new branding “has been well received” with digital impressions reaching more than 1.4 billion and more than 2 billion overall media impressions since launch.
The campaign also heavily relies on digital to communicate deals and new products in real time. While this has been effective and enticing target consumers, the digital focus has caused a slow down in purchases from highly price sensitive shoppers who hunted for deals in the print adds, acknowledged the retailer’s CFO Denise Paulonis.
Ecommerce ‘is more important than ever’
As the company rebrands, it also is developing its ecommerce business with the third-quarter launch of delivery and curbside pickup through shop.sprouts.com.
The retailer initially struggled with how best to offer online shopping, but Sinclair said shop.sprouts.com is an ideal hybrid model that taps Instacart for order management technology but allows the retailer to leverage customer insights and does not require shoppers to have an Instacart account – creating a seamless Sprouts experience.
The approach seems to be going over well with consumers given it was one of the fastest growing e-commerce businesses in the second quarter, Sinclair said.
Ultimately, he noted, “it is more important than ever to have a full omnichannel offering as many customers use both in-store and online for their grocery needs,” and they need options that complement each other.