Amin Maredia took over as CEO for Sprouts Farmers Market in August of 2015. That same month saw the start of the longest deflationary period since 1959.
While Maredia says that’s resulted in a few white hairs, he says Sprouts sees the light at the end of the tunnel. Speaking as part of the Goldman Sachs Annual Global Retail Conference on Thursday in New York, Maredia said Sprouts is perhaps better positioned than some discount and conventional retailers to catch a glimpse of that light.
“I think you absolutely take the 40,000 grocery stores and break them into three buckets,” he said. “The discounters, the ALDIs and the Walmarts and the Walmart Neighborhood Markets and the coming Lidls … they’ve very different than the conventional grocery stores and then everybody else, including specialty.”
Those discounters and conventional retailers are still increased friction in CPG products, something that doesn’t impact Sprouts stores, which emphasize organic foods, produce and fresh perimeter.
“I think going forward, the conventional grocers could have friction on both sides of potential needing to invest in center store and fresh and healthy and health and that's a tough situation to be in,” Maredia said. “So fortunately for Sprouts, we don't sell many of these items and we're not impacted by that friction of discounters. And we've not seen when stores, discounters have opened across the street from us in the past. We don't take any meaningful hit in sales starting Day 1.”
Now Sprouts sees a returning inflationary environment and says it is ready to capitalize with product innovation in the fresh department and undisclosed e-commerce developments.
Sprouts same-store annual sales have jumped from $14 million to $18 million over the last four years and Maredia says that number can keep heading north with a continued focus in the fresh department, which has grown from the mid 40-percent range to more than 60 percent of the company’s business.
“Many of the things we’ve done have fundamentally driven us from that $14 million to $18 million benchmark by growing our fresh department,” he said.
On the e-commerce front, Sprouts is looking to leverage its findings from its early entry into first-hour home delivery — Maredia says the company was the first large-scale grocer to do it — into accelerated growth on the online ordering and delivery front.
Sprouts is in the process of retooling its entire online platform and will roll out the new system in the first quarter of 2018.
“We’ll be rolling out something new that I’m very excited about which is really adding a lot more consumer user interface to be able to see no only the value that we have at Sprouts, but more talking about the food, the attributes, being able to see the unique items at Spouts, being able to see the unique product labels,” Maredia said.
These solutions — which Maredia said Sprouts is keeping in its back pocked for now —are intended to add value to the consumer and make things simpler. The hope, Maredia said, is this can help combat the convenience advantage that traditional retailers have over Sprouts in many large markets.
“By definition, the conventional (retailer) is closer to our customer,” he said. “With this home delivery platform, what we’ve actually seen is the inverse of sales where most of the sales are coming outside of the 5-, 7-minute trade area. So it’s bringing us the strategic benefit of extending our trade area beyond what most customers like to shop and driving this.”
Sprouts’ relationship with Amazon Prime Now has continued, despite the online giant’s recent acquisition of Whole Foods. Maredia says the company wants to be where the customer is, which means, ideally, every platform possible.
“We can say with one certainty, there’s one platform which has full comfort, and that’s the Sprouts platform,” he says. “Past that, we’re really looking at all the opportunities and risk with every potential partner. And so there’s no change in our Amazon relationship today. We’ve been having really good dialogues with them around some of the ramification of the acquisition. And collectively, we’ll make thoughtful decisions on what’s best for Sprouts and what the right thing to do is for APN.”