During the company’s first quarter earnings discussion on May 4, Sprouts Farmers Market BB #:168563 executives said the company’s improvements in produce supply chain are essential to growing the business.
“Produce has got a huge opportunity, and we’re doubling down on that,” said CEO Jack Sinclair, during the earnings call.
Sprouts has been working to expand its customer base beyond core shoppers, and the company is investing in low prices to do so, Sinclair said. There are opportunities to pick up new shoppers as consumers ease up on pandemic-restricted shopping habits.
“Our opportunity is a non-Sprout shopper who may not be aware of Sprouts’ low prices on produce and actually perceive us as being more expensive in this category,” he said.
Being lower cost in produce is a key factor for Sprouts because it is one of the few places customers can cost-compare with other grocers. In categories like meat and dairy, Sprouts often has a premium product over other grocers.
“Produce is really the only place where we sell the same things as other people,” he said. “We’re looking for a 10 percent to 15 percent price gap against most conventional (competitors).”
Sprouts is seeing improvements in freshness and quality since it added new produce distribution in Colorado and Florida last year.
“We’ve recently restructured our produce department and reorganized to improve freshness, seasonality, locally sourced products and unique and exclusive varietals,” Sinclair said. “A clear differentiation for Sprouts is our dedicated local produce team. With our local produce sales growing steadily, these teams are developing even stronger relationships with smaller local farmers and we’re giving long-term commitments to these growers.”
Sprouts plans to make improvements in its Southern California distribution center, moving to a larger facility next year to support growth.
“We’ve already begun to work on this facility, which will include ripening rooms to present fresher product to our customers,” Sinclair said.
Sprouts also has been expanding its organic produce category, which now accounts for 35 percent of its overall produce business.
“That’s pretty substantial,” Sinclair said. “And that whole context of being different, it’s kind of coming alive even in categories like produce.”