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Private label lifts Sprouts

Sprouts private label success
Private label products are expected to account for 12 percent of the retailer's revenue by the end of the year and have helped it stay strong during hard times for the grocery sector.

Despite a unique balance that sees 60 percent of purchases come from the perishable side, predominately non-perishable private label offerings have become key revenue drivers for Sprouts Farmers Markets, officials said.

"We started private label about four years ago as about 5 percent of our overall sales," Amin Maredia, CEO of the Phoenix, Ariz.-based Sprouts said during a presentation at the BMO Capital Markets Farm to Market Conference on Thursday in New York. "But as I mentioned today, 60 percent of our sales in the store are on the perishable side of the business, which has limited amount of private label in it."

Nearly 50 percent of Sprouts baskets arrive at checkout carrying one or more private label items. The product line is on pace to garner $500 million in revenue by year-end, which would account for 12 percent of total sales.

"When we look at our overall sales today, we've gone [up] from 5 percent to 11 percent [across the] overall store, but certain departments of this store are between 15 percent and 20 percent," said Maredia during the event.

He pointed to packaged grocery, dairy, and frozen as areas that are actively expanding private label’s footprint.

"The growth in private label has not only been by more items in the basket but it's by new trial," said President and COO Jim Nielsen. "So, the outlook is good, but we're very objective about the business, it's not just about pure growth of private label penetration. It's about the balance for what the consumer wants."

The success of private label has helped facilitate 40 straight consecutive quarters of positive comparable sales.

In the face of 3 percent deflation during the first quarter ended April 2, Sprouts still managed to notch 1.1 percent comps as total sales rose 14 percent to hit $1.1 billion. Net income remained steady at $46 million but in-store traffic ticked upwards by 0.6 percent.

Along with the positive growth being generated by the store’s private label, both executives believe that their staff and the company’s training methods have helped keep the brand strong during times of hardship for the industry at large.

"Last year we promoted at the store level almost 20 percent of our team members," Maredia said during the presentation. He called employment opportunities at Sprouts a career as opposed to just a job.

"We believe that one of our biggest points in difference is our people," said Nielsen during the presentation. "So we made a very conscious business decision to invest more into training."

Nielsen expressed that in a store that relies so heavily on produce and perishable items-especially during a period of significant deflation- knowledgeable and helpful  sales staff are key to keeping the numbers trending upward.

"You sell natural food," he added. "You can’t offer natural foods on the shelf. We’ve got to educate our team members about the products and help them connect the products to the individual to help them along that happy, healthy journey."

This piece originally appeared on Supermarket News, a New Hope Network sister website. Visit the site for more grocery trends and insights.

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