Sprouts Farmers Market has a Plan to Win

On May 1, 2023, Sprouts Farmers Market reported very positive news during its earnings call. The Wall Street Journal’s Market Report indicated that Sprouts’ first quarter earnings rose 24%. Sprouts’ CEO Jack Sinclair told analysts, “We are pleased with our first quarter; we believe our long-term growth strategy is gaining traction and driving positive performance. Our results included comparable store sales growth of 3.1%, total sales growth of 6 percent and adjusted diluted earnings per share growth of 24 percent.” Sprouts’ shares rose 8% after the announcement.

From reading Sprouts Farmers Market transcript of the earnings call, it is clear why the brand-business is doing well in a category where Whole Foods and Trader Joe’s are serious players.  Sprouts Farmers Market has a Plan to Win.

A Plan to Win is a single page stating the brand-business’ purpose, actions to progress towards its purpose and performance metrics to which everyone must adhere. A Plan to Win document is a commitment for achieving organizational alignment. A Plan to Win ensures that everyone, every function and every division in the organization are on the same page. 

For successful brand revitalization and for brand growth, the brand-business’s culture must define and commit to a roadmap that defines how to win. The Plan to Win is this roadmap. The Plan to Win integrates brand-business actions for success across Eight Ps: Purpose, Promise, People, Product, Place, Price, Promotion and Performance. 

Brand Purpose is the compelling statement of the brand-business’ intent or mission defining the brand-business’ destination, its North Star.  Brand Purpose is the common goal for all the actions on behalf of our brand-business. The entire organization must be aligned behind a single, clear, shared brand-business goal. 

Sprouts compelling purpose is, “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.”

Brand Promise is the contract a brand-business makes with its customers. The Brand Promise expresses the promise that if you buy this brand, you will get this relevant, distinctive brand experience. Brand Promise summarizes the brand-business’ focus, directing how the brand-business will develop the connection with its customers. By consistently living up to a Brand Promise, the brand-business will be relevant, distinctive, powerful and great. 

Sprouts’ Brand Promise is to “… offer a unique grocery experience inspiring wellness naturally with a carefully curated assortment of better-for-you products paired with purpose-driven people.” As a “healthy grocer,” Sprouts continues to bring the latest in wholesome, innovative products made with lifestyle-friendly ingredients such as organic, plant-based and gluten-free.

In the Investors Presentation available on Sprouts’ website, Sprouts states: “Sprouts delivers a unique farmers market experience: bringing together passionate, knowledgeable team members and the assortment of high-quality food that is good for us and good for the world.”

The goal of the Plan to Win is to yield more customers, who use more often, are more brand loyal and are more profitable. 

Sprouts’ focus on the bottom line of the Plan to Win is apparent in Mr. Sinclair’s statement that 60% of the brand-business is driven by high-frequency customers. Sprouts goal is to drive current core customers to shop more often and to encourage trials from new customers who are also with Sprouts’ target audience.

When an analyst inquired about the 60% of high-frequency customers, Mr. Sinclair indicated that these are Sprouts’ most important customers and the goal is to have even more of them. Sprouts’ data indicate that Sprouts’ assortment of goods really “resonates” with this 60% of customers. And, Sprouts’ hope is that by investing more into the high-frequency customers, Sprouts will generate lifetime value from their shopping behavior and loyalty. One way to engage more completely with this 60% is through personalization. This will happen by more creative omnichannel experiences.

Effectiveness of a Brand Purpose and Promise is achieved by actions taken across: People, Products, Place, Price, and Promotion. 

People

Employees are the most important assets of any brand-business. Employees are the frontline when it comes to customer relationships. Data continue to show that internal brand-business pride and satisfaction are critical success factors affecting external brand attitudes. 

On its website, Sprouts describes its team members as proud to provide unwavering commitment to customers with friendly, knowledgeable and engaging service to support customers on their healthy living journeys each and every day. In the earning report, Mr. Sinclair made it clear that growing customer engagement was critical. Customer engagement happens many ways, not the least of which is team member “happiness and helpfulness” as cited in the investors presentation.

Additionally, “Sprouts’ commitment to friendly service doesn’t stop at our stores. We pledge to be a good neighbor in every community we serve through volunteer work and local event support. Each year, our direct and in-kind donations help local nonprofit organizations, food banks and service groups touch millions of lives to help make our world a better place. Our team members inspire, educate and empower our customers to live healthier lives through various in-store, online and community events.”

Product (and Service)

This is the tangible evidence of the truth of the Brand Promise. A brand-business needs to be relevantly differentiated, delivering superior customer-perceived value. Continuous renovation and innovation are imperative for success. Product and service renovation and innovation are keys to sustainable profitable growth. 

Sprouts promises a fresh, friendly take on grocery shopping, where exploration and discovery happen naturally. Sprouts is known for the season’s freshest, most delicious produce around. Sprouts takes extra care in curating uniquely healthy products to fit any lifestyle.

The analysts heard that Sprouts focuses on curation and innovation to inspire customers. Mr. Sinclair stated that Sprouts stocked its stores with innovative, attribute-friendly products appealing to its target customers. He added that Sprouts is building a strong affinity to its own brand, Sprouts. Customers recognize that the Sprouts brand provides quality offerings that taste great and that are good to for you.

Place

This refers to any location where the customer interacts with the brand-business. It can be a physical location (a grocery store, for example) as well as a virtual one on any device possible (a website, app, virtual world, etc.). Wherever and whatever it is, place is the face of the brand. 

Sprouts is segueing to smaller stores, from 30,000 square feet to 23,000 square feet. The Investors Presentation indicates that a smaller format is closer to Sprouts’ framers market heritage. 

 The brand-business finds that the smaller stores are more cost effective. There is noticeable improved performance from the newer format. Sprouts is opening new stores and plans to achieve 10% unknit growth per year.

Price

Price is an important part of the customer’s trustworthy brand-business’ value equation. But, it is not the entire cost-definer. Price is only one of the customer’s costs. Price is not the same as value. Value is determined by the total branded experience a customer expects (functional, emotional, and social benefits) relative to the costs spent (in terms of time, money [price], and effort) multiplied by trust. 

Pricing at Sprouts is a critical strategy. Mr. Sinclair indicated that with the high inflationary environment, Sprouts brought in “more value forward offerings like multipack grocery items and value-sized meat and daily offerings, while continuing to offer great pricing in the produce department and on important items such as Sprouts brand cage-free eggs at $3,99 and healthy sandwiches at $4.99.

Mr. Sinclair responded to an analyst on pricing indicating that Sprouts is constantly looking at what other competitors are doing. But, Sprouts believes that its margin growth will maintain regardless of price wars or further issues with inflation.

Promotion

This is about creating an integrated approach to raising awareness, familiarity, and preference of the brand. Promotion includes every communication on behalf of the brand. 

Sprouts uses in-store tastings of its Sprouts own brand. These own brand-business tasting promotions are successful in convincing customers to purchase a Sprouts-labeled item.

Although not mentioned in its earnings report, Sprouts is spending on its brand identity. The goal is to further differentiate Sprouts in fresh food. Mr. Sinclair wants to move Sprouts from being known for great pricing on fresh food to a destination for elevated quality and distinction in fresh food. Again, the goal is to attract and grow a more loyal and more profitable customer base.

Along with an improved logo, digital advertising and mass media, there is a new slogan, “Sprouts, Where Goodness Grows.” This reinforces Sprouts community efforts referred to as “Here for Good.”

This updated brand identity is a way of not only emphasizing the in-store differentiation with fresh foods, but also the array of vitamins and associated health products and the availability of bulk items.

Performance means designing and implementing a system-wide measurement program for monitoring progress with annual milestones spanning three years. These are the metrics that will be used to evaluate the progress toward the achievement of the Brand Purpose and Brand Promise through implementation of the activities of the Five Action Ps. 

The Investors Presentation provides insights into Sprouts’ performance metrics. Sprouts employs Net Promoter Score, but also collects data on its ecommerce penetration, sales penetration of its Sprouts own brand, long-term financial targets, comp sales, EBIT margins, supply chain and ESG.

Sprouts Famers Market has a Plan to Win. Sprouts’ brand-business’ success can be linked to this over-arching strategic outline. Wall Street may not care about how the results are generated just as long as positive results are generated.  But, from a brand-business standpoint, there is no better way to move forward towards enduring profitable growth than by having a Plan to Win.