Sprouts Farmers Market 2015 Annual Report Download - page 9

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1
PART I
Item 1. Business
Sprouts Farmers Market operates as a healthy grocery store that offers fresh, natural and organic
food that includes fresh produce, bulk foods, vitamins and supplements, grocery, meat and seafood, deli,
bakery, dairy, frozen foods, body care and natural household items catering to consumers’ growing
interest in eating and living healthier. Since our founding in 2002, we have grown rapidly, significantly
increasing our sales, store count and profitability. With 224 stores in 13 states as of February 25, 2016,
we are one of the largest specialty retailers of fresh, natural and organic food in the United States.
At Sprouts, we believe healthy living is a journey and every meal is a choice. The cornerstones of
our business are fresh, natural and organic products at compelling prices (which we refer to as “Healthy
Living for Less”), an attractive and differentiated shopping experience featuring a broad selection of
innovative healthy products, and knowledgeable team members who we believe provide best-in-class
customer engagement and product education.
Healthy Living for Less. We offer high-quality, fresh, natural and organic products at attractive prices
in every department. Consistent with our farmers market heritage, our offering begins with fresh produce,
which we source, warehouse and distribute in-house and sell at prices we believe to be significantly
below those of other food retailers. In addition, our scale, operating structure and deep industry
relationships position us to consistently deliver competitive prices and promote value throughout the
store. Based on our experience, we believe we attract a broad customer base, including conventional
supermarket customers, and appeal to a much wider demographic than other specialty retailers of natural
and organic food. We believe that over time, our compelling prices and product offering convert many
“trial” customers into loyal “lifestyle” customers who shop Sprouts with greater frequency and across an
increasing number of departments.
Attractive, Differentiated Shopping Experience. In a convenient, small-box format (average store
size of 28,000 to 30,000 sq. ft.), our stores have a farmers market feel, with a bright, open-air atmosphere
to create a comfortable and engaging in-store experience. We strive to be our customers’ everyday
healthy grocery store. We feature fresh produce and bulk foods at the center of the store surrounded by a
complete grocery offering. Consistent with our fresh, natural and organic offering, we choose not to carry
most of the traditional, national branded consumer packaged goods generally found at conventional
grocery retailers (e.g., Doritos, Tide and Lucky Charms). Instead, we offer high-quality and innovative
healthier alternatives that emphasize our focus on fresh, natural and organic products at great values.
Customer Engagement and Education. Our commitment to “Healthy Living for Less” is shared by
team members throughout the entire organization who are dedicated to our passion for educating and
engaging with our customers with the goal of making healthy eating easier and more accessible. We
believe our well-trained and engaged team members, as well as the materials we disseminate through
our digital and social media platforms, help our customers increasingly understand that they can
purchase a wide selection of high-quality, healthy, and great tasting food for themselves and their families
at attractive prices by shopping at Sprouts.
Our Industry
We operate within the grocery store industry which encompasses store formats ranging from small
grocery and convenience stores to large independent and chain supermarkets. According to the
Progressive Grocer, U.S. supermarket sales totaled over $638 billion in 2014. Based on our industry
experience, we believe we are capturing significant market share from conventional supermarkets and
other specialty concepts in this supermarket segment.
The supermarket segment is comprised of various formats, including conventional, supercenter,
natural / gourmet, limited assortment and warehouse. While the natural and organic food segment is one