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A Key Business Overview of Sprouts Farmers Market

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Sprouts plays a value role in the organic segment

Sprouts Farmers Market (SFM) sells fresh, natural, and organic food in thirteen states across the US through more than 200 stores. The company is a value player in the organic grocery sector and focuses on selling organic groceries at competitive prices. Its stores follow a small-box format, with an average store size of 28,000–30,000 square feet. The company’s stores are located in the following types of areas:

  • shopping centers
  • lifestyle centers
  • independent single-unit, standalone developments (in some cases)

The map below outlines the company’s store distribution and highlights its expansion plans.

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Sprouts sells selected products that are similar to those offered by Whole Foods Market (WFM), which is the premium player of the organic food space. The prices offered by Sprouts, however, are much lower than Whole Foods offers and are somewhat more comparable to the prices of traditional supermarkets like Kroger Company (KR).

Sprouts’ segments and product divisions

Sprouts classifies all its sales under one reportable segment and categorizes its products as perishable and non-perishable products. Sprout’s sales have an almost 50–50 divide between perishable and non-perishable products, with perishable products accounting for 50.8% of the company’s total sales in fiscal 2014.

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Sprouts’ worldwide sourcing and distribution

The company sources its products from over 850 domestic and international suppliers. Nature’s Best is the company’s primary supplier, accounting for approximately 23% of its total purchases in fiscal 2014. United Natural Foods (UNFI) accounted for another 4% of Sprouts’ total purchases in fiscal 2014. The company distributes all its products through two leased distribution facilities and one third-party operated distribution facility.

ETFs with exposure to Sprouts and peers

Investors looking for exposure to Sprouts Farmers Market (SFM), Kroger (KR) and Whole Foods Market (WFM) along with United Natural Foods (UNFI) can invest in the Fidelity MSCI Consumer Staples Index ETF (FSTA). These four companies together make up approximately 2.6% of FSTA.

Now let’s step out and take a look at the larger US supermarket industry.

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