Dive Brief:
- Sprouts Farmers Market is opening 13 new locations across the country over the second half of 2019, including its first store in Virginia, according to a press release emailed to Grocery Dive. Once the additions are complete, Sprouts will operate 340 stores across 22 states.
- Five new locations will open in Florida and showcase the chain's latest upgrades designed to boost shopper engagement, including an enhanced seafood and meat counter. The Market Corner Deli will showcase a center island and offer prepared foods, in-store sushi, sandwiches and fresh juices.
- Four other store locations will launch in California, while Maryland, North Carolina and Arizona are set to open one store each.
Dive Insight:
Sprouts' store footprint continues to rise along with sales. In the fourth quarter of 2018 the natural foods retailer reported net sales of $1.3 billion, representing an 11% increase compared to the fourth quarter of 2017. Sprouts attributed the growth to a 2.3% increase in same store sales and excellent performance at new locations.
Sprouts is focusing its growth in coastal regions where demand for natural and organic products is high. The brand's 2019 expansion plan involves opening about 30 new stores, with half in existing markets and the other half pushing into new markets.
Across the industry, grocery store openings increased nearly 30% in 2018, driven primarily by small-format stores like those Sprouts operates. Florida and California boasted the most openings, indicating the importance of these populous states where demographics are shifting and established retailers are getting disrupted.
New features like an upgraded seafood and meat department are aimed at giving Sprouts' stores a more sophisticated feel, with a focus on customer engagement. The chain's expanded ready-to-eat offerings aim to draw consumers looking for an easy meal at home or a quick bit for lunch during the workday. Sprouts is also building out its private label portfolio as consumer demand rises and competing retailers like Kroger build out their own brands.
On top of increasing its store count, Sprouts also recently added Instacart delivery in six states including Alabama, Florida, Georgia, North Carolina, South Carolina and Tennessee with some locations offering one-hour delivery. Sprouts now offers delivery at more than 200 stores and has begun testing pickup at select locations. During the second half of this year, Sprouts will introduce a white-label platform that plays up the retailers' branding and offers a more "unified" experience for shoppers.
But competition in the natural foods segment remains fierce, with Whole Foods rolling out a new round of price cuts, Walmart pushing further into fresh foods and e-commerce, and discounters Aldi and Lidl expanding in key East Coast markets.
There are also signs that Sprouts' focus on fresh food and growing emphasis on prepared meals could become a liability. According to a consumer survey by Wolfe Research, consumers are visiting natural and organic stores less frequently and increasingly looking to restaurant delivery for quick meals. An alarming 41% of respondents say they plan to purchase fewer prepared foods and ready-to-eat meals from grocers.
