Sprouts Sees Booming Q1 With Private Label Changes, More Customers

Sprouts specialty grocer reported a 4% rise in Q1 comparable sales last month and plans to open over 300 additional stores in key states. The increase in traffic for both in-store and online shopping was attributed to standout departments like proteins and frozen foods, expanded online sales, product sourcing innovations, and high customer service scores. 

“We believe we have become the destination for exciting entrepreneurial food companies to introduce their unique products to the marketplace,” Sprouts CEO Jack Sinclair told investors. 

Sprouts’ same-store sales have grown steadily over the past two years. E-commerce sales have risen from 9.4% in 2020 to over 12% in 2023, reaching 14% in Q1 2024. The grocer partnered with Uber for delivery and also partnered with Instacart and DoorDash, yielding strong sales and expanding customer reach. 

In Q1, Sprouts opened seven stores and plans to open 35 by the end of 2024, representing a 10% annual unit growth. With 100 approved new stores and 70 executed leases, the company aims to enhance brand awareness by densifying markets. The larger goal is to expand further into California, Texas, Florida, and the Mid-Atlantic regions. 

Sprouts plans to test a new loyalty program to boost first-party shopper data and deepen customer engagement. The grocer expects total sales growth of 7% to 8% and comparable sales growth of 2.5% to 3.5% for the fiscal year.  

“It’s very difficult to define what we do within the context of the total grocery market share. But certainly, since the pandemic, I think people have been more comfortable in shopping in more places, which suits us as a complementary shop,” Sinclair told investors. 

In addition to expanding its physical footprint, Sprouts has been enhancing its private label portfolio, which now contributes significantly to its revenue. In 2023, private brands accounted for over 20% of Sprouts’ annual revenue, nearly double their sales share in 2017. According to Jac Ross, Vice President of Sprouts Brand, the company has consistently added 300 to 400 new products annually to its private label line over the past two years. 

Recent private label releases include items like hot honey chicken tenders, non-dairy frozen desserts, and flavored cauliflower rice. These products meet Sprouts’ health and nutritional standards, such as carrying only organic frozen vegetables, and offer unique items not typically found in conventional grocery stores. This strategy aligns with Sprouts’ goal of providing differentiated, everyday items at competitive prices, especially in response to inflation. 

Sprouts’ focus on private label growth reflects broader industry trends, with private label products accounting for over 20% of grocery industry unit sales last year, reaching a record $236 billion. Grocers are enhancing their private brands to help customers cope with inflation, and Sprouts is no exception. 

Additionally, Sprouts is rebranding various products to fall under a single, more recognizable, “Sprouts Brand”. Previously, Sprouts had numerous private label lines across different departments, such as Butcher Shop, Fish Market, Market Corner, and Sprouts Essentials. The consolidation aims to establish a trusted brand that shoppers can easily recognize and trust. 

The first items released under this unified brand were private label cleaning products about 18 months ago. The rebranding of food and beverage products is expected to be completed by mid-2024. The company is also rebranding its private label vitamins and supplements under the Sprouts line this year.  

Sprouts also leaned into seasonal offerings by consolidating their “Harvest” and “Holiday” items under the Sprouts brand, creating recognizable and cohesive packaging. This approach has helped customers easily identify seasonal items and enjoy themed displays in stores. 

Overall, Sprouts Farmers Market is focused on growth and differentiation, with a strategic emphasis on enhancing its private label portfolio and rebranding efforts to create a stronger, more cohesive brand presence.