Sprouts Farmers Market

Sprouts Farmers Markets (Sprouts) is a Phoenix, Arizona-based chain of 400-plus natural foods stores in 23 U.S. states and $6.4 billion in sales as of 2022. In its product assortment, brand image, and store environment, Sprouts emphasizes freshness, health, innovation, and differentiation. A large majority of the items it offers have one or more attributes tied to health, local sourcing, specific production or ingredient standards, dietary needs, sustainability, etc. In 2023, under CEO Jack Sinclair, a 35-year industry veteran who joined Sprouts in 2019, Sprouts is implementing a strategy aimed at sharpening its identity as a specialty natural foods retailer and achieving 10% store growth per year. Rather than competing head-to-head with conventional supermarkets, Sprouts is positioning as a complementary grocer—a destination where customers can find differentiated, healthy products and brands that are often unavailable elsewhere. The multi-pronged strategy includes (among other measures) redefining the retailer’s target customer, eliminating its prior practice of aggressive promotions, embracing a smaller store format, and renewing its focus on innovation and emerging brands. Sinclair and his team are confident that Sprouts has a strong strategy, one authentically rooted in its history and attuned to current and future trends around health. The business has improved its earnings before interest and taxes (EBIT) margin considerably since 2019 and is on track to grow revenues 6.5% and open 30 stores in 2023. But the cost of expansion has risen in recent years, and finding new locations has been difficult at times. There are questions about whether to focus growth on markets where the brand is well known or in new markets, where it is more difficult to communicate what separates Sprouts from other retailers. A key question for Sprouts is how to maintain a sufficiently differentiated and appealing positioning to persuade its target shoppers to spend a little more, or drive a little farther, to shop at Sprouts instead of doing all of their shopping at a conventional supermarket, many of which are adding more natural and organic foods to their shelves. How can Sprouts best capitalize on and sharpen its specialty natural foods positioning? And how can it convey a brand message centered on health? What adjustments, if any, should Sinclair make to Sprouts’s model and strategy?