Shelley E. Kohan (00:01.58)
Hi everyone, thanks for joining our weekly podcast. I’m Shelley Cohen and I’m so excited to welcome Nick Conat, who is the president and chief operating officer of one of my favorite places, Sprouts Farmers Market. Welcome, Nick.

Nick Konat (00:18.871)
Thank you, Shelley. Appreciate it. Very excited to be here.

Shelley E. Kohan (00:22.774)
you are a Crave retail radical from the ROM Report so congratulations on that and today we’re going to spend some time finding out why you are a retail radical. But before we jump into that I do want to mention that prior to coming to Sprouts I think you’ve been there since 2022 so you’ve been around for a few years but you actually come from another great retailer Petco and you also have some experience at Target too so definitely

all about the customer or pet focus, I should say, industry.

Nick Konat (00:56.577)
You bet. I’m fortunate to have worked for some really great retailers and learned a lot in my time at Target and Petco and bring that to bear for an amazing company here at Sprouts. And again, thank you for the honor and recognizing us.

Shelley E. Kohan (01:10.232)
Absolutely. So Farmer, I can’t imagine any of our listeners not knowing what Sprouts Market is, but maybe you can just give us a little kind of rundown of what Sprouts Market is.

Nick Konat (01:21.889)
Yeah, believe it or not, there still are some people that probably don’t. We’re not quite fully national yet, and we’re working on that. we’re all about serving a really unique target customer we call the health enthusiast. And so that customer is someone who’s looking for better for you products that serve their unique dietary and lifestyle needs. And for us, that’s organic, that’s grass-fed, that’s gluten-free, that’s clean ingredient decks.

and we offer that across our unique format of fresh products and meat and deli and bakery and obviously produce as well as our grocery and vitamins and bulk business. we are a smaller format. We are not a massive conventional format. We’re a secondary shop. So we actually believe we are here to, we’re not trying to replace everybody’s grocery shop. We’re focusing on a really unique customer and their unique needs and recognize you still need to get certain things from other places.

and we’re okay with that, we’re your place to go for a better few healthy, fresh products that serve your unique needs.

Shelley E. Kohan (02:30.901)
And Nick, where are most of your stores located?

Nick Konat (02:34.87)
Yeah, so today we’re in 23 states. We kind of call it a bit of the smile of the United States. So we kind of run across the country. are up in Washington state, down through California, across the southern border, all the way up into the northeast. And we’re going to be launching our first store in New York in the first quarter of next year in center reach on Long Island. Or I think I’m supposed to say Long Island, if I’m saying that right for my friends there. So really excited.

Shelley E. Kohan (03:01.517)
That’s right.

Nick Konat (03:04.814)
to do it good to enter that market. have about 400 and just shy of 480 stores today and a lot of density in California, Arizona, Colorado, Texas and Florida but as you probably have seen we’re going to continue to grow and expand as Jack, our CEO, to say from sea to shining sea.

Shelley E. Kohan (03:23.533)
I love that. Now, of course, I know you because I spent like 14 years in California. So I know it well. So I’m very looking forward to the one that’s going to be coming in New York. And I think you offer just such a unique perspective. And one of the things I love about Sprouts Market is that you really put the customer at the center of decisions that you’re making. So can you talk a little bit about that?

Nick Konat (03:46.819)
Absolutely. You know, I mentioned it at the beginning. I think it’s important to note for us, and part of what differentiates us is the grocery market’s about $1.6 trillion, right? Massive market. But we’re really only focusing on about just shy of $300 billion of that market. And as I mentioned, that’s our target customer we call the health enthusiast. And we are laser focused on serving them and their needs. That’s why we don’t carry a lot of products you’ll find

and other conventionals because those aren’t important or as important to our customers. So everything starts with that health enthusiast and how we take care of them. And what they tell us is they come to us for things that are fresh, high quality, innovative, local, organic, and healthy. And that’s what they’re looking for. that customer, there’s friction. If you think about trying to live and eat better, it’s not easy to know exactly what should I be eating.

You know should I be in seed oils or not in seed oils should I be eating? know grass-fed or non grass-fed. It’s it. There’s a changing world out there It’s Access isn’t easy right a lot of stores don’t carry Enough of this they might have a couple of skews for gluten-free customers in the category But they don’t offer the breadth that you need to take care of yourself or your family And they can be expensive You know and and those friction points along with the fact that it doesn’t always taste great. That’s what we go and tackle we have a

Shelley E. Kohan (05:10.893)
Yeah.

Shelley E. Kohan (05:16.13)
Mmm.

Nick Konat (05:16.612)
fresh delicious products with cleaner ingredient decks and better quality that we price at a really really affordable price for people so they can take care of themselves and their family. And we say listen whatever your interest is if you’re into you know organic or clean eating or just want really indulgent healthy clean products we’ll take care of them. We have the breadth across the store to serve your needs across every category whether that’s frozen or grocery or meat or dairy you’re gonna find the unique things

you need that you can’t get anywhere else here at Sprouts.

Shelley E. Kohan (05:49.826)
That’s great, Nick. And I think you’re actually solving two big concerns with consumers. One is that this younger generation, so the young Gen Zs and younger millennials and soon to be the Alphas that are now being parented by Gen Zs, they are really concerned about healthy eating and food. And so you’re solving a big problem for them just making it easy. And I think the other challenge that you mentioned is

You know, you talked about grass-fed, not grass-fed. This is good, this is not. And it’s like changing every, I don’t know, it feels like it changes every day. So helping consumers navigate, you know, what is right for them, I think is really important.

Nick Konat (06:29.878)
Yeah, you’re absolutely right. we’re not in the business of telling people what they should or should need. That’s for them to decide, and everyone has their own unique needs. But for us, it’s making sure whatever you choose, we have solutions for you across the categories so that you don’t have to feel like you’ve got to go 10 different places to find those unique attribute-driven products that you need. And you said, think we’ve noticed both my generation and other generations where they’re looking to

Just feel and live any better and longevity is a core focus for them They find us for all the different things that we do to help them live healthier as they get a little bit older And then you mentioned it the younger generations You know there it’s so important to them not just the product themselves with who makes it and the founders and the entrepreneurs and the commitment to purpose and values and why they do it is so important to the younger generation and we do such a great job with our foraging team and our group and

finding people who share our values and want to make the food system better and believe in better quality and better ingredients. And that really does resonate with the young customers for sure.

Shelley E. Kohan (07:40.418)
Well, I have to tell you something, Nick. This is really funny, but I got schooled by my son the other day who picked up a package. I’m not going to name the product, but I was eating something and he picked up the package. He’s like, mom, I can’t believe you’re eating that. That’s like crazy. You shouldn’t be putting this stuff in your body. So yeah, they are like seriously on top of it.

Nick Konat (07:54.338)
you

Nick Konat (07:59.114)
you’re not kidding. have daughter who’s a lacrosse player, she’s teenager, and she sends me Instagram posts all the time of food influencers saying what she should be eating and shouldn’t. And she always asks me, you carry that? Do you have that ingredient? Do you not? So I’ve got lots like you. I have lots of critics at home that help me make sure we do right by our customers, especially those younger ones.

Shelley E. Kohan (08:01.911)
Ha!

Shelley E. Kohan (08:22.593)
Definitely. So what do you think, what’s the top issues that are weighing on the mind of the consumer today?

Nick Konat (08:28.963)
Wow, there’s…

There’s a lot of it. I think the overarching issue for consumers today is still, everyone is still trying to figure out how can I eat better and what are those things that are gonna help me do so. And the key area is really longevity, as I mentioned, is a big one. So it used to be about calorie intake and how do I manage my kid. Now it’s about what foods are gonna help me with my biohacking and my biometrics.

Shelley E. Kohan (08:48.139)
Mm-hmm.

Nick Konat (08:59.781)
my biology and help me feel and live better and longer in my later years. That’s a really big one that a lot of people are tackling right now and there’s a lot of great products out there that look at the, again, the biology of the human and not just the fat or the calories that maybe used to be so prominent back in the day. So that’s a big one. I think for us overall, what we’re really excited about is just about everybody is trying to find a way to eat better.

that’s gonna change. This isn’t a fad. This continues to evolve, but more and more people as we get more educated, as they learn more about what’s in our food or what’s not in the food, in the food system, we feel like more and more people will wanna come to us and enjoy what we’re all about, which is finding products that are cleaner and better, but also taste great and serve unique needs. So we’re excited about a market that I think will continue to grow over the next number

Shelley E. Kohan (09:31.085)
Mm-hmm.

Shelley E. Kohan (09:53.195)
Mm-hmm

Nick Konat (09:59.674)
of years and provide a tailwind to our business.

Shelley E. Kohan (10:02.741)
Yeah, for sure. So how are you staying ahead of the shoppers? How are you anticipating their needs? How are you looking at the future? I’m sure you’re using data analytics, but if you could probably share how you’re doing that, that’d be great.

Nick Konat (10:15.511)
Yeah, so we, you know, I think one of our secret sauces is the work we do on innovation and product and staying ahead of those trends. And a couple of things, maybe I’ll call it one, is we have a team called the foraging team. And their job is to do just that, is to go out and find innovators, find creators, find entrepreneurs who are at the cutting edge of innovation and create partnerships and relationships with them very, very early.

to develop products. As you mentioned, they’re also looking at, through data and insight, where the trends are, and very, very early. We have the ability to, we can take things on that are at such an early stage in the trend curve that they wouldn’t be on the radar or wouldn’t be of interest to the larger players. And we can dip our toe into that and get into it very early and build a customer base there, because our customers are looking for that. They’re online looking at the latest and greatest trends. So we use social listening. We have trend services and analytics.

Shelley E. Kohan (11:13.709)
Nick Konat (11:15.605)
We obviously are very very involved in the innovation community. You’re going to find us everywhere across the world meeting with makers and innovators. And then what we do with that, which is really fun, is we create a really low barrier of entry and speed to market and getting product into the stores. So a lot of other retailers know it’s a long lead time to get set up, huge cost to get in, lots of fees. We have a space in our store dedicated to

emerging innovation you can’t find anywhere else. And so for our innovators or entrepreneurs, it’s a great low barrier entry to get in and go, listen, we’ll get you in. Let’s put you in for 90 days and start to see what’s the customer uptake, how you doing? Is it working? Is the customer enjoying it or not? And we work with them to tweak and adjust based on the learnings they get. So it’s a really great place to try and build the brand and then grow it at Sprouts. And if it works and it graduates,

We put it in line with the rest of our items and we build brands that way. And I think brands are seeing us as the best place to go do that because it’s such a simple, easy, low cost, high speed way to get into market. the foraging work is really big. We’re adding 7,100 new items a year into our store. Yeah, so almost over 30 % of our service turns over and you and I both know retail.

Shelley E. Kohan (12:36.533)
What?

Nick Konat (12:45.091)
very well in my past, if you had that kind of turnover, you would just lose customers because they beg, well, you’re taking my favorite item, right? And I’m going go find it somewhere else. Our customer, as long as you give them something that’s equally as innovative and unique and delicious and attribute forward, they’ll buy that because they want to explore. They want to have the newest, the greatest, the most unique product there. So it’s an amazing, unique opportunity for us to serve that customer with the amount of innovation we bring in.

Shelley E. Kohan (12:51.456)
Definitely.

Shelley E. Kohan (13:14.86)
I love that and Nick, I’m going to put you on the spot here if you don’t mind. But do you have like an illustrative example of some cool, innovative product that you kind of brought to market and just kind of blew you away, the success of it?

Nick Konat (13:18.051)
Sure.

Nick Konat (13:28.897)
Wow, we have a lot of them. think, so I’ll give you one that’s.

Well, I’ll give you one and also if you’re okay with it, I’ll give you a tease to a couple that we are either just launching or also coming out that you can look for. The one I think that really blew us away, happened about a year ago was a group came to us with a sea moss product. It a sea moss gel that was all about minerals and how you take the minerals from the sea moss and it’s a really great supplement. It was in a form and a factor that

Shelley E. Kohan (13:39.692)
Oh yes! I love that!

Nick Konat (14:05.157)
people hadn’t seen before. And we were the first to bring it to market. We brought it to market on the Innovation Center that the foraging team found. It quickly graduated and the business grew just dramatically, Shelley. I mean, just an amazing amount of uptake went viral. And what was amazing with it is it started out with sea moss. And then we had a product in our dairy called Coconut Cult. That was a yogurt. And people were taking Coconut Cult, mixing with the sea moss and creating a

Shelley E. Kohan (14:30.272)
Wow.

Nick Konat (14:35.077)
a potion, a food to eat as a delivery mechanism. And so we had two unique brands you couldn’t really find anywhere else that just went crazy and they’ve been big, big drivers for sales for us and we’ve built those brands with those companies. So that’s been great. And then as I mentioned a couple of teasers, I mentioned we work with makers. fortunate, there’s a well-known celebrity chef,

Shelley E. Kohan (14:54.924)
it.

Nick Konat (15:05.177)
in our backyard here in Arizona named Scott Conant. You’re probably familiar with him on Food Network, a phenomenal chef, Italian chef. We were connected with him a couple years ago, and we’ve been spending two years working with him and his team to create a really amazing pasta sauce program that’s super clean, five ingredients, really, really high culinary quality, and something you can’t get in the mass market at all. We just launched that this week.

and it’s doing really really well and Scott’s been a tremendous partner. And then the last one I’ll mention is in January we’re launching a product called the Haymaker by the folks at Tractor. So Tractor Beverage might be known for what they’re doing. They have an organic food service beverage program. But the Haymaker Punch was a product in the 1800s that farmers would drink to kind of as an elixir for them to help them get through the long days of farming. And this is an organic

Shelley E. Kohan (15:52.556)
you

Nick Konat (16:04.913)
cider vinegar product that you can only find at Sprouts. It will be launching with the good people from Tractor. They’ll have to come and check out an innovation in January. So another reason to hopefully get you back in the store next year.

Shelley E. Kohan (16:18.738)
my gosh, that sounds amazing. I know my son is going to love that new product because that’s what he’s all about. that’s fantastic. So what do you think the department store or big box retailer, what can they learn from kind of what you’re doing or from the supermarket sector?

Nick Konat (16:37.357)
You know, think there’s a lot to it. I’d rather not give away too many secrets, Shelley.

Shelley E. Kohan (16:42.453)
I know, I know. I’m pushing it, I get that.

Nick Konat (16:43.607)
But no, think, yeah, no, that’s okay. I appreciate the question. know, honestly, listen, I think a couple of things. know, regardless of just Sprouts, I think an ability to truly focus on your core customer and how you serve them is key to winning right now. And the people who do that well, whether it’s in the natural channel, whether it’s in mass or grocery, I think it’s really about knowing your customer and serving them. And those are the people that are winning right now. I think differentiation,

wins. And if you have a clear value prop with a differentiated measures like we do, know, for us people know what we’re all about. They know what to expect. We’re not trying to win every single dollar in the marketplace and our ability to serve our customer and bring unique products you can’t find anywhere else helps us drive traffic, helps us drive loyalty and retention. And so for us, that’s what we’re all about, right? Is playing our game and serving that unique customer.

Shelley E. Kohan (17:15.756)
Mm-hmm.

Nick Konat (17:43.461)
customer and doing it in way that others can’t. And I think that’s been the model for success in retail for years and that’s the one that we certainly bring to market.

Shelley E. Kohan (17:52.769)
That’s interesting. And you mentioned loyalty, so I know you have a loyalty program. Tell us a little bit about that. Sprouts Rewards, I think it’s called.

Nick Konat (17:57.88)
Yeah, you bet. Yeah, you bet. So it is called Sprouts of Words. I think…

You know, I’m excited about our, about the future and our growth. You know, I mentioned we’re growing new stores. We’re to be putting a lot of new stores in the market. Eight to 10 % new stores every single year. That gives us a lot of growth to acquire new customers and get in new markets and new places. But then with the existing customer, you know, we have a relatively small share of wallet for that customer. And what’s funny, they tell us, they tell us they love sprouts.

I’ve never worked anywhere where I’m around and when I’m visiting stores, I’m in different markets and I have a Sprouts t-shirt on or a Sprouts hat on, people will literally go out of the way to come up to you and go, oh my God, do you work for Sprouts? I love Sprouts, I love it. And you know, in retail, that’s not always, especially in grocery and the food space, usually it’s seen as a chore and people love our stores and love our products, but the opportunity for us is how do we get them to come back a bit more often and while it being

Shelley E. Kohan (18:52.396)
Totally.

Nick Konat (19:02.915)
a secondary shop, put a little bit more, a few more items in the basket from us than maybe they do in other places. And so the loyalty program was created to help us do just that, which is get better data on our customer and understand them better. And then use that data to personalize recommendations, offers, new items and products that we know and believe our customers might like that will help them make that extra trip or add that extra item in the basket. So if I know you’re gluten free,

Let me introduce you to new products that we’re launching in the gluten-free space so you are aware of that and can try them and add it. Because again, our customer wants that access to newness and also doing with the value. So the program just finished rolling out nationally at the end of October and we’re thrilled with the uptake. We’ve seen tremendous response from customers in signups and scans and the usage of the program. So really excited about it. It’ll be a tool for us for the next number of years.

Shelley E. Kohan (19:34.666)
Mm-hmm.

Nick Konat (20:02.711)
to learn more about the customer and grow customer value at the same time and serve that important customer in helping them live and eat better.

Shelley E. Kohan (20:12.01)
I think the other thing, Nick, is that you’re really a purpose-driven company, and I think consumers really want to be part of that community.

Nick Konat (20:20.887)
You’re not kidding, it’s…

You know, I’ve always said, you know, when I came to Sprouts, one of the core reasons I came here, I came here for three core reasons. One was we great people, Shelley. We have amazing, amazing people at Sprouts at every place you go. Stores, support center, people you want to work with. We have a ton of potential to grow, as we talked a bit about. Then the purpose piece was the third leg of the stool where, you know, every company has a purpose.

But is it truly meaningful and impactful and can it galvanize your people? And for us, our purpose is helping people live and eat better. for when you go to our stores and you talk to our team members, they buy into it, they believe it, they understand it’s different. And that’s why you see different level of service in store and different commitment to helping people find what they need. And if you do it really well, like I think we are doing, your team members see it and it galvanizes your team and they believe they’re part of something

bigger and better and it’s their why. But also, you know, the customer I think starts to see it and they realize what you’re all about. And for us, you know, our purpose is about how do we help be a great partner in our community and how do we be a member in serving our communities in a healthy way through our foundation and through our stores. How do we be more sustainable in our practices and make sure we serve our planet? It’s how do we serve our team members? You know, I’m really excited. We promoted

Shelley E. Kohan (21:28.746)
Mm-hmm.

Nick Konat (21:53.13)
We re-added 3,400 new jobs last year, and we’ve promoted over 30 % of our people in the last year to help us drive our growth, right, and open these new stores and grow. And so we’ve invested a lot in developing and building our team members, and then obviously taking care of our customers, right, and our vendor partners, and how do we bring, find the right products, the right vendors to take care of it. So that’s kind of how we bring it to life, and I love how it’s galvanized our team and our business.

Shelley E. Kohan (22:21.695)
It’s great Nick and you forgot you also your community all the work you do in the community That’s kind of like the third piece of it It’s the employees taking care of yourself taking care of your customer and then the community you do so much We could probably have another whole podcast about all the work you’re doing for communities and really supporting communities in many different ways so thank you for all the work that you do and sprouts does but

So you’re a Crave Retail Radical. I’m sure you get recognized all the time. I see a lot written up across the industry about the great work you guys are doing. What are you most proud of?

Nick Konat (22:59.127)
You know, there’s a lot to be proud I’m honestly, I’m most proud of the team we’re building and the culture we’re creating and how we serve our customer. When you walk into a store and you feel the energy of the team we have and their willingness to do whatever it takes to take care of our customer and that culture we’ve built, how we’ve driven the purpose, the service we’ve built within our teams, and then how we’ve been able to

grow our business and grow our team members as a part of it. I I go into stores and I’ll run into people who I might have seen three or four years ago and they were a deli manager and now they’re running a store, right? And you see them grow and they come up to me and they say thank you so much and listen it’s not me, it’s our team, but they’ll come up to me and say thank you so much what I’ve been able to do to take care of myself and my family and being at a place that I love working so much and being able to grow and see the growth in the community.

Shelley E. Kohan (23:42.977)
Love it, yeah.

Nick Konat (23:58.934)
I think that’s to me the thing that makes me most proud is the impact we’re having on our people. And then in return what those people are doing to serve our customers and our community.

Shelley E. Kohan (24:09.761)
Wow, Nick, I love it. Thank you so much for spending time with me today. It was great getting a little sneak into, you know, how you do it so well. So thank you for sharing and thanks for being here. Our listeners are very appreciative of hearing from you and congrats on being a Crave Retail Radical.

Nick Konat (24:26.168)
Thank you, it’s my pleasure and I appreciate the time, Shelley.