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Sprouts Farmers Market: Competitive Pressure Mounting

Thomas Paulson
Sep 30, 2022
Sprouts Farmers Market: Competitive Pressure Mounting

Key Sprouts Farmers Market Metrics

  • Sprouts' two largest markets are California and Texas. This past week, we took a deeper look at Sprouts in California and were surprised by two learnings (in addition to being reminded that California is an absolutely intense market for grocery retail; there are many brands and niches, and many, many excellent operators).

Source: Sprouts Farmers Market 2021 Annual Report

  • First, and through the lens of Placer.ai data and Experian Mosaic psychographics, Sprouts had the highest percentage of customer profile overlap, with Grocery Outlet beating out Aldi, Smart & Final, and Safeway. We would have expected this to be Safeway. The cohort Cosmopolitan Achiever is Sprouts’ largest customer in California at 12% and those are "affluent middle-aged couples and families enjoying dynamic lifestyles in metro areas." Sprouts’ second largest cohort in California, at 10%, is the Steadfast Conventionalists, who are "conventional Gen-X families living suburban and city lifestyles." (For the data, or two add brands to the analysis please reach out to us.)
  • Given that shared audience, we also falsely suspected that Grocery Outlet’s new locations in California (25 locations since 2020) were encroaching on Sprouts. However, that is not the case as nearly all of those openings are out of Sprouts’ trade area.

  • Our second observation is how successful Safeway has been in retaining its customers. While the visits are down, that appears to be a less consequence as its trade areas are growing, especially with affluent households (>$150K in HH annual income). On average, each Safeway location has added around 68 affluent visitors. And on average, these visitors come 2X per month. As most will suspect, these visitors spend multiples of what a typical visitor spends. Another distinguishing feature of Safeway’s business is its high frequency of visit, which reflects the convenience of its locations and the strength of its fresh business.
  • As we suspected, Sprouts is losing shoppers, and of particular concern is that many of the lost shoppers were affluent households. How many? On average, each Sprouts location has lost -765 affluent visitors. Sprouts is also losing visits to the store that were part of a second stop on the consumer’s shopping trip (per our data). Given gas prices and inflation, that second shop is a luxury that many are foregoing.

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Thomas Paulson

Director of Research and Business Development, Placer.ai

Thomas Paulson spent 20 years as a Wall Street analyst and a member of asset management teams at AllianceBernstein and Cornerstone Capital, representing top-50 ownership positions including Target, Home Depot, Nike, Amazon, Google, and many more.

He brings consumer related expertise and knowledge of enterprises in retail, CPG, financial services, telecom, and entertainment.

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