Issue #58: What is Sprouts?

Sprouts Deep Dive

As someone who has spent most of their life living in the northeast region of the United States, there are a lot of grocers I was accustomed to that are not widely known across the country. Thinking of Big Y, Roche Bros, Walbaum’s, Stew Leonards, etc. However, on the flip side, there were a lot of stores I was not personally familiar with. One of the largest stores that I had not come across much was Sprouts Farmers Market. Now that I am spending more time in the industry, as well as Sprouts rapid expansion/rise to national prominence, it is a retailer I have my eye on. Figuring I am not the only one who wants to learn more about Sprouts, I figured a deep dive was needed.

A brief timeline of the company:

• 1943 - Henry Boney starts a fresh produce stand in San Diego

• 1969 - Henry’s sons founded Boney’s Market, more of a full department grocery store

• 1997 - Boney’s Market renamed Henry’s Farmers Market

• 2002 - Other members of the Boney Family start Sprounts Farmers Market in Chandler, Arizona

• 2011 (The Big Merger) - Henry's, Sun Harvest, and Sprouts are all bought and merged by Apollog Global Management. Henry’s (29 stores) and Sun Harvest (8 stores) were both part of Wild Oats, and Whole Foods sold them off when it bought Wild Oats, to solve antitrust issues.

• 2013 - Sprouts becomes a publicly traded company

• 2015 - Apollo exits its position in Sprouts, no longer owning any part of Sprouts

• 2024 - Sprouts now has 442 stores in 24 states (mostly on the West Coast and in the Southern United States)

From an assortment and positioning perspective, Sprouts positions itself as an affordable store that is also on the healthier side. It is closer to a Trader Joes, albeit with a wider assortment, than a Whole Foods. Organic and bulk foods are a portion of their products. They are trying to attract any customer who is trying to live a healthier life, regardless of income level. Clearly, this target demo is working, and customers are responding well. Here is a snippet of their stock price since going public:

The stock only really started to take off around 2024, as growth really started to take off. This growth continued in the Q2 2025 numbers, which were just reported. Total quarterly revenue was up 17% to $2.2B YoY, same-store sales were up 10%, gross margin improved 91 bps, net income was up 45%, and 12 new stores were opened. Out of all those numbers, what stands out to Wall Street the most is the net income/sales. At 6%, that is 1-6x compared to most retailers in the grocery space. Impressive, but will definitely be hard to sustain. Part of this can be attributed to expanding its Private Label assortment, but the other part is attributed to raising prices to consumers and raising fees to its suppliers. As long as Sprouts keeps growing, suppliers will be willing to continue investing. However, as soon as that growth stops, I would imagine most suppliers will pull back, as Sprouts is super expensive. Same on the consumer front, as long as consumers feel their dollar is maximized at Sprouts, they will continue to shop there. Luckily, there is a huge opportunity to keep growing. Whole Foods has 500+ stores, Trader Joe’s has 600+. Finally, it will be interesting to see how much this growth was due to the UNFI, a key natural foods distributor, having an outage. Sprouts does not use UNFI, but many of their competitors, like Whole Foods, do.

From a retail POV, I think what Sprouts is doing to target the demographic that Whole Foods, TJs, etc. are targeting is a very different angle. The size of Whole Foods, curation of TJs, and bulk foods (which most of their competitors do not do). From a brand POV, if that’s the customer you want to target, Sprouts may be worth it, but it will be very costly, so make sure the growth is there. From my POV, I am excited to try Sprouts as they continue to expand in the northeast (expansion is another pillar of growth).

Dishoom: Popup → US Location → Investment

Back in Issue #44, I covered Dishoom, the UK based Indian food restaurant group, was opening a US location following a successful popup. Dishoom is well known for its curry as well as the atmosphere in the restaurants. This location will be the 14th location, and its first outside the United Kingdom. The plan is to open the NYC location in 2026, and it seems like locations in Boston, Chicago, and DC could be soon to follow. Clearly, the pop-up helped attract/cement the attention of L Catterton, the private equity firm that does a ton of consumer and retail investments. It was announced this week that L Catterton will be investing in Dishoom. At 14 locations, it may seem small for PE to get involved, but given the high-end nature of these restaurants, there is a world where the group is doing $100M+ in revenue. Similarly, L Catterton has invested in Bar Taco and Barcelona via its purchase of Del Frisco’s, which owned those two restaurants at the time. Exciting to see more capital flow into the restaurant space!

Sweetgreen Makes Cuts Across The Board

In earnings season, there are companies that benefit and companies that struggle. One of the ones that struggled was Sweetgreen. Total revenue was up 0.5% vs Q2 2024, but most of that increase was from opening new stores, as same-store sales were down 7.6%. More sales are being done via 3P apps (aka more costly), and total company as well as restaurant-level profit is down (full breakdown from Sweegreen here). All these factors mix together to lower revenue, increase costs, and decrease profits. Not a great recipe for success. In response, Sweegreen is cutting 10% of support center staff as order volume is down. On top of that, ripple fries were a big bet this summer as a growth level. I had them, was not impressed. Clearly, I wasn’t the only one who felt that way, as they are being discontinued after only being on the market for five months. According to CEO Jonathan Neman, customers liked the fries, but they added too much complexity to restaurant operations. In an effort to attract consumers, Sweetgreen is planning to increase protein portions and bring back more limited time offerings (LTOs). Will that be enough to win back customers?

Toast x Amex = More Personalized Restaurant Experiences

American Express has been on an acquisition/partnership spree in the restaurant space. As credit card companies try to be more competitive to acquire users, one of the key areas of differentiation between the cards is restaurants and lounges. In 2019, American Express acquired Resy, a reservation tool. In 2024, it acquired Rooam, a tech integration platform, as well as Tock, another reservation platform. After these moves, there were 27,000 restaurants on the American Express Global Dining network. Now that there are all these restaurants, AmEx wants you to have the best experience so you spend more money. Enter Toast, the restaurant POS system. The collaboration plans to create more personalized restaurant experiences using AmEx’s customer data and Toast’s handhelds/POS terminals, which are utilized by restaurant staff. I am very intrigued by this partnership, as I am not sure it will have the desired outcomes. The types of restaurants that use these tools are not the super high-end restaurants that are more exclusive. Maybe it will help boost the long tail spend, but not sure it will be the deciding factor for someone to use AmEx or a restaurant to accept AmEx.

Retail vs Consumer Software: The Illusion of Choice

Many consumer algorithms present the illusion of choice, when in reality, they are pushing consumers to the same choice. I have been reading the book Filterworld, which talks about how all algorithms end up surfacing the same results. For instance, Netflix in 2023 had 4,000 movies, 33% less than the average Blockbuster. Netflix is not the only consumer software where this is the case. Many consumer software programs like this have taken away the actual ability to browse and replaced it with an illusion of browsing. Now that software has replaced a lot of the functions of traditional retail, this shift will be something that I think in 30 years we will look back on as a seismic shift in culture, all driven by algorithmic logic.

• Summary: Rooted Restraunts is a fast-casual lunch spot made using only seven ingredients or fewer. Customers are offered different-sized plates across starches, vegetables, proteins, and sauces.

• My Take: Back in Issue #33, I wrote about the future of the Bowls, Salads, and Wraps market. Rooted was not on my radar yet, but I am very excited to find out about them. I love the lunch focus, low square footage, and simple + high-quality menu. This space is super competitive, but I do not believe there is a winner yet in the more premium part of the space.

• Founder(s): Lily Rivkin

• Funding: Unknown

• Number of Locations: 1 in NYC

• Social Media Following: 23k on TikTok, 11k on Insta

Additional Links:

1. Do customers prefer dupes compared to designer versions? (read more here)

2. In Seoul, South Korea, the city is combating loneliness by building stores where people can gather and chat (read more here)

3. DoorDash reported earnings, and all metrics are growing fast (read more here)

4. Dollar General will now be on Uber Eats (read more here)

5. Instacart sees double-digit profit growth in Q2 earnings report this week (read more here)

6. Allbirds continues to struggle, lowers guidance for balance of year performance (read more here)

7. Bath & Body Works targets Gen Z populations, bringing its products to over 600 college campuses (read more here)

8. Warby Parker is no longer having people try products on at home, can either do a digital experience or go into a store, most customers live near a store (read more here)

9. Why is Claire’s struggling post-bankruptcy? (read more here)

10. Indochino is opening up more locations in Nordstrom stores (read more here)

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