How Sprouts Is Buzzing Into Growth

Sprouts Farmers Market is continuing to set the stage for what officials view as a coming period of rapid new store growth and further differentiation behind smaller, more focused and productive stores; more efficient ways to service them; and new talent focused on getting its real estate deals done.

In Orlando, Fla., the Phoenix-based natural foods merchant late last month opened its first fresh food distribution center in Florida to service what officials see as an attractive market for new doors in the Sunshine State. The 135,000-square-foot facility will service the 32 Sprouts stores currently operating in Florida—and another 10 new units in the state expected to open later this year.

The Florida distribution center is the second new fresh food DC the company has opened this year. In March, a similar facility opened in Aurora, Colo.; the chain is also seeking a site in the Mid-Atlantic region to service a coming growth front there.

The new facilities will support a renewed plan to grow store counts by 10% annually beginning next year—while improving the quality of the foods they offer inside and a transition to a new prototype format that officials say would showcase a differentiated product assortment and emphasize sampling and trial. That would indicate a pace of 35 to 40 new openings every year, beginning in 2022. Those new stores will support sales growth along with what officials expect would be “modest” comp-sale increases.

This year, Sprouts intends to open 20 new stores, with half of them in Florida. Sites in Brandon, Boynton Beach, Tampa Heights, Kendall, Dania Beach, Port St. Lucie, Orlando and Homestead are among those on the way. The Dania Beach store will be among the first to debut what Sprouts refers to internally as its “V6” format, or a new prototype that is smaller (about 23,000 square feet vs. stores as large as 30,000), about 20% less expensive to build and occupy, and devotes more space to merchandise than its predecessors.

A key element of this store will be an “innovation center” that will call attention to rotating selections of new and unique products, and as pandemic restrictions allow, incorporate product sampling. Speaking in the Deutsche Bank Global Consumer Conference last week, CEO Jack Sinclair described this part of the store as a key to generating consumer “buzz” about its products and the brand.

“When customers come in, they go, ‘I wonder what they’re going to have in that place?’ ” Sinclair described. “There’s always something new to get excited about.”

In Florida, four of its planned openings will feature elements of the developing new prototype, including “updated signage and decor that makes it easier for our customers to find the new, innovative and attribute-driven products that Sprouts is known for. We’ll be expanding on these updated design concepts and department layouts further in 2022,” Dave McGlinchey, Sprouts’ chief format officer, told WGB in an email.

Sprouts is no stranger to aggressive building plans. Through acquisitions and organic expansion, it raced to its current footprint of around 360 stores in less than 20 years, growing unit counts by well over 10% in many of those years. But while the chain at one time had eyes on stores from coast to coast, this will be a relatively concentrated building spree, confined to markets where its distribution capacity and a refined target customer intersect, McGlinchey said.

Each of Sprouts’ new stores will be concentrated within 250 miles of its distribution centers—which, including the new Orlando and Aurora facilities, are located in Colton and Union City, Calif.; Glendale, Ariz.; Wilmer, Texas; and Atlanta. This obviates the need to haul great distances—Florida stores until now pulled goods from Atlanta, more than 400 miles away; and in Colorado, fresh foods journeyed more than 800 miles from Glendale. This will support greater productivity and sustainability, officials said, while aiding speed to shelf, a key quality differentiator when it comes to fresh foods.

Where Sprouts locates those stores within those 250-mile radii also matters, as its coming fleet is abandoning much of their previous ambitions to pick off mainstream grocery shoppers and instead focuses on a subset of them interested a differentiated assortment—and less drawn to the chain for its opening price points. 

“As we expand across new markets, we’re focusing on neighborhoods with large concentrations of future Sprouts shoppers, who are what we call health enthusiasts and experience seekers, and we see a lot of room to serve those particular shoppers in these areas,” McGlinchey said.

To meet this group, Sprouts has rebuilt its internal real estate teams, hiring several new executives to oversee regional site selection, WGB has learned.

These include Erica Alman in the Mid-Atlantic, and Ed Toohey in Dallas, both named real estate directors by Sprouts earlier this year. Alman, who for the past six years has helped plot Lidl’s U.S. expansion, joined Sprouts in March. Toohey, who joined Sprouts in January, previously was a real estate director for Main Event Entertainment, a Plano, Texas-based chain of bowling and arcade facilities.

In the Southeast, including Florida, Steve Jarvis has served Sprouts as a real estate director since last year. Jarvis had previous stints in real estate with Earth Fare, Harris Teeter and Albertsons among others. These directors report to VP of Real Estate Terry Gibbons, who reports to McGlinchey as part of Spouts’ property team, which has been reorganized since Ted Frumkin’s departure to The Fresh Market.