PHOENIX, AZ - Sprouts Farmers Market CEO Amin Maredia sat down last week to discuss the rapidly growing fresh-food retailer’s business model and the way in which a focus on fresh, natural, and organic groceries has seen the company reap rewards at a time when center-store giants are struggling.
“Sprouts is different because we were born with fresh, natural, and organic in everything that we do,” Maredia explained. “We don’t have the center store, CPG products in our stores. So really for the last 15 years, since our founding, we have been focused on fresh, natural and organic food.”
Maredia sat for an interview with CNBC Squawk Box anchor Becky Quick, who asked the executive about the Sprouts model and its relationship to changing consumer preferences.
“You know, I think consumers are changing in two ways: in what they are eating and how they are eating,” noted Maredia. “And with the ‘what,’ consumers are eating more fresh, natural, and organic food. 30 years ago that was a $20 or $30 million dollar business, and today it’s an over-$200 billion dollar business. So it’s becoming more mainstream.”
Quick asked Maredia about increased direct competition from fresh-focused retailers and home delivery companies like Fresh Direct and Amazon and Whole Foods.
“As a company we’ve just continued to really understand the customer and evolve with the preferences,” he explained. “Over the last decade… We’ve continued to evolve our store in the fresh, natural deli departments, private label—really focusing on trends. And what that has allowed us to do over the last decade is to take our average store sales from $12 million a year to $18 million a year, and we aren’t done yet…it’s all about understanding the types of food the types of preferences—how consumers want to eat.”
Maredia also outlined changing consumer preferences in terms of in-store meal kits and delivery options, as well as addressing price pressure and shrinking margins in the grocery industry.
“What’s interesting is the mix has changed, but if you look over the past five years our merchandise margins have remained relatively consistent,” added Maredia. “Some department and categories in the store have lower margins but we have added fresh foods in other departments and private label in other areas with higher margins to offset that.”
For more, watch Maredia’s interview in its entirety, here.
