Succeeding in Sprouts Market

Jordan Buckner: [00:00:00] One of the most exciting things right now are the number of retail opportunities for CPG brands seem to continue to expand, and Sprouts has been making a lot of headlines in terms of looking for new, innovative products to bring in, particularly with things around their innovation set. If you're anywhere on LinkedIn, you see.

Posts about brands launching and you, wanting to succeed there so that they can be merchandise on the full shelf. So how do you actually get into the program? How do you succeed once you're in and is it right for your brand? So, to answer all these questions for myself and for you, I've invited on Luke Abbott with VDriven Luke's works directly with Sprouts to help them through a lot of their different programs and. Is probably beating with him. What, like every week in some capacity. 

Luke Abbott: Recently it's been every week. Yes, 

Jordan Buckner: every week. And so he is really here to dive down deep. So Luke, welcome to the show. 

Luke Abbott: It's an honor to be here and always a pleasure.

So I happy to dig in. This is such a great subject. 

Jordan Buckner: So. Tell me a little bit more about like, the route to market for brands [00:01:00] going to Sprouts. There's the innovation set and then there's kind of, what do they call it, the core set? For their Yeah, for the store. And like what are the different at. 

Luke Abbott: Yeah.

So it really depends on if you're ambient, then the Innovate Now world fakeness innovation set at Sprouts is a really good opportunity for a brand that is not yet in. national distribution? Certainly not like, well, who's nationally or Ralph? Nationally or Kroger.

Nationally, or Albertsons or Walmart. Right. It's more like him. It's a few regional chains. I'm just getting started. Maybe you, and, and again, I'm speaking here. From what I've noticed and what I've experienced, I'm not speaking as a representative of Sprouts at all. So what I've noticed is that typically it's like 300 stores or fewer, seems to be like a sweet spot.

And even like a brand that has no doors yet, literally just this is launching the market this for the first time. That those are often appealing. Based on what I, I've, I've experienced. 

Jordan Buckner: So what is the innovation set? What's the timeline for how long you're in there? How do you kind of apply and get selected?

Luke Abbott: Yeah, my experience is certainly [00:02:00] with me presenting to the team. I believe there's a portal submission to the website that you could just do on your own. As well. And that I think the number one way beyond using like a broker, like what we do at VDriven. Is just being out at shows that the innovation team tends to be, you know, shortly at Expo at Fancy Food Show.

Like they're definitely around and they do a great job of being accessible. I've noticed at the shows there's usually a crowd of people. Oftentimes someone from the team will be speaking at you at one of these events and that often feels like a great way to start the conversation.

And yeah. There's also, we posted a number of pitch slams that V Driven has put on as well. and if you have another broker, certainly asking your broker to present is a, is a great avenue. 

Jordan Buckner: I love that. And what types of products tend to do best within the innovation set? 

Luke Abbott: Yeah, so again, speaking of my own experience and, and what I've seen is anything is certainly it's ambient and in this case, and so that's number one.

I've seen everything in ambient on the set, right. I've seen health and beauty products to beverages, to protein bars, to [00:03:00] popcorn. So it's really like, it's not so much what the product is, I've noticed, but like how innovative that product is. This is addressing some white space that there is a hypothesis, a reasonable hypothesis.

So this is where the consumers will be going in the future. So that's what I see. And then I should clarify too. Beyond the innovation set. There's this area in refrigerated. I think dairy, refrigerated dairy controls it. And that is the fresh spine cooler. And that's another place in the store where refrigerated product would have an opportunity.

But that does not go through innovation, that would go through the category management team for dairy, I. 

Jordan Buckner: That's exciting. And so I unfortunately don't have any sprouts near me, and so I've never set foot in one. Explain to me like visually what this innovation set looks like. Is it mixed in with everything else in the short store?

Is it Its an island. 

Luke Abbott: It's its own island. And, not every store has it, but, and what I've seen is like 95% of the stores do, and it is a segregated, separate set island, and it is. Definitely some great signage and a lot of call outs. Sometimes brands are able to [00:04:00] be featured on the kind of the end caps of the eyelid and they'll have special signage, great extra awareness of that product and that brand.

Jordan Buckner: That's really cool. And so then, how long are typically brands in the innovation set once they are approved? That, 

Luke Abbott: yes. That question earlier, sorry, can I get into it? Yeah. So typically it's 90 days and, 90 days kind like Max, but it could be longer. But I think the goal is for, in my experience, to be out by 90 days, I think by where people get confused on the innovation set is they think, oh, 90 days I should be on shelf for all 90 days.

 I failed to buy a mod shelf, but 40 days because I sold out a distribution center. We keep our POS going and it's like, no, no, no, no. that's a win. And like, you know, sprouts thought it would take 90 days to sell through this, you know, and you sold out in 30 days. That means your velocity was probably higher than what they anticipated, and it means that you have a higher probability, no, no guarantees, but a higher probability of getting to the main mindset.

So it's something that I have to counsel people on office every week. It's like, no, no, no. This is good. You're winning. 

Jordan Buckner: Well that's important because I think a lot of people think of like, oh, I don't wanna be [00:05:00] outta stock because retailers hate that. Yes. But in this case, they're testing, essentially they wanna know how fast you sell and that the product's gonna move off the shelf from them.

And so with that, are they essentially just placing one PO at the beginning? Yeah. And they're in Great 

Luke Abbott: question. Yeah. So typically, typically, and I've seen exceptions to this, I'm sure there are even more of them, but I'm aware of it's a one-time PO for dc it can go through. I've never seen Unify. I, I've seen it go through KeHE and pot foods.

Essentially Sprouts takes responsibility for us. The product isn't selling well. That's not generally on the brand, right. Unless there's some merchantability issue. It's really on Sprouts and they, if there's any discounts needed at the end, sprouts does the discounts. I mean, it's really friendly to an emerging brand.

Jordan Buckner: Oh, that is supportive. Most times when you're launching in new retailers through some of the other distributors, there's essentially you're guaranteeing the product's gonna sell. And if it doesn't, then it can be returned. So this is insanely helpful. I'm glad to know that KeHE and pot views both support the programs.

I know brands have been asking about both of those [00:06:00] distributors. Yeah. 

Luke Abbott: And, and KeHe recently, and again, it changes all the time in my experience, but K a program where that's very friendly to emerging brands in the innovation set. Be, if you're aware of the AEP program, which they launched, which is extremely friendly and I think a D one is not using that in general should be, but it is also a separate program that I've seen.

Again, this could change, but I've seen it or where it's even even more advantageous. When innovation set , to miss out, to skip a lot of the setup beats for the distribution centers, for example. 

Jordan Buckner: Can you explain what that program is for those who dunno. 

Luke Abbott: But first I'll explain. AEP is a program where you would give 2% opt invoice to ke for brands, I believe it's less than a half million dollars in volume, less than one year.

With KeHE. And, you know, the set up fees can be massive and when you don't have an ad program where you don't have this AEP and so it's, it's the 2%. I think is, is like an amazing deal from KeHe. So when you're setting up, you would, you'd wanna talk to your category manager and say, I want be my AEP program, please.

And I imagine the first year where you're, [00:07:00] as you're opening the distribution centers for I guess a good, successful emerging brand you're probably gonna spend five to 7%, you know, , that invoice price to KeHe of year one without it, and if it's can just be 2% and a flat fee there's a. I don't have , the details of every single thing you skip, but there's a lot of fees that you, that you eliminate , by choosing AEP. so that exists ongoing as far as I know. And then what might be more transient, but that does exist today is the innovation set p and p at Ke that allows you to skip out an even you to amount the 2% even that you're paying up invoice to effectively accomplish the same objective. 

Jordan Buckner: That's really exciting.

So definitely make sure to look into those programs if you are launching and then 

Luke Abbott: that make that, make sure too, I think that then pot foods is great for someone who just wants absolute transparency. Correct. Hey, it's like they put another website, you know what things cost you, you're not gonna be surprised in my experience.

And so they're two good options. 

Jordan Buckner: Yeah. One thing I always care about brands is, pot foods is really great at being transparent. I [00:08:00] always tell you like there's still fees that they charge. , I've sold my, your pod, but they list all the fees so that you can go through and understand what those are and calculate it versus surprises unknown later.

So that's the the big advantage. And then Luke, , approximately how many brands have you worked with kind of through the brokerage side? Do you know who's like, gotten into the innovation set? And then I'm curious to know any tips for how to be successful in selling product off the shelf and Sprouts?

Luke Abbott: Yeah. 'cause we, we were doing innovation fish slams. There's a lot of brands. I don't even know the number, but it's been a lot. and I think you were asking what it takes to be successful is that, is that 

Jordan Buckner: brand how to sell off the shelf? 

Luke Abbott: Okay, so number one is TPRS Lisa, at the time, this recording are not permitted, right?

So you can't do it, you can't do a tag on the shelf, the promotion. So number one thing we always recommend is Instacart. Generally, I was just on a call with Instacart and a brand this week and general. Week two, end of week two, it's gonna, there's gonna be a file that goes Instacart, and it'll appear in Instacart generally across all the stores.

Instacart has [00:09:00] the ability certainly , to bid on keywords and it has the ability to provide allowances like effectively TPR allowances to someone buying on their platform. And I'll just clarify here too, you know, and I won't give Sprout specific numbers, but in general I'm noticing that where Instacart is involved, this kind of , digital sales, if you will , can be 15 to 25% of a department or a category sales. It's very significant. So that's like the number one thing. Digital coupons through the Sprouts app. I love those. I'm hitting a, a core Sprouts consumer who took the time to download a Sprouts app to look for coupons, right?

So , that's like seeding the future of your product line is digital coupons. In Marlin Company, you could use it to do that, you would need a clearing house as well. There's a number of those out there. They're really great to work with. And another area too would be, I guess, social nature or go to aisle.

Those are good options. They, they could be a little bit more I call 'em like scavenger hunts. Like when I, when I downloaded the app with my, my two younger sons, like , we would go hit stores we'd never normally go to 'cause we need [00:10:00] free product. That's why I think the, between digital coupons and social nature, you go to aisle, I like that digital coupons because I'm hitting it for Sprouts consumer and investing in the future of the account, not, and then social nature and go to aisle are extremely effective.

Right? They, and in, in getting the velocity numbers you need and driving trial that may not be that spout support consumer. 

Jordan Buckner: Yeah, I think those are really great tips because ultimately, right. You have to determine if Sprouts , would be a great long-term partner for your brand. And if it is, what can you do to do everything you can to drive that product and get it moving off the shelf?

So that you have an opportunity to be their long-term. And like you said, even better if you're building that velocity with core sprouts consumers. 

Luke Abbott: Yeah, exactly. Exactly. Well said. 

Jordan Buckner: I love that. And then in general, what would you say about Sprouts as a retail opportunity for brands like in terms of understanding who their consumers are, like the types of products that are going, there are shoppers are going for like, have a discovery mode where they're looking for the most innovative products they're looking for, like better for you versions , of Staples.

I'm [00:11:00] just curious what you've learned about the consumers there. 

Luke Abbott: It's a good one. Not at all that it from Sprouts, but at, but what I've noticed is I've been involved with Sprouts since store four. I used to own a distribution company , that serviced them all across the country that I exited to KeHe on.

So I've been very involved and watched the evolution , of this chain, , and at the beginning , it definitely was like double ed. Wednesday was a big day. It was about these deals and I think Sprouts was effectively being cherry picked a lot of the time. And then there was this shift in 20 20, 20 21 under Jack Sinclair, the CEO, where.

I noticed that he was brilliant and he kind of got rid of the double head Wednesday and said, you know, let's really become this destination for people who, you know, wanna really kind of relaxed area, a place to shop. Like it's really welcoming when you walk into a Sprout store and let's have.

Even like improve the, the standard of our ingredients and everything too, and the experience and even the private label will have really innovative products that have nothing like it else on the shelf anywhere, right? Like you're, they're definitely leading , the charge in [00:12:00] innovation. And I think if you looked at the stock price, I encourage anyone listening to this look at, look at the chart of stock, the stock price since 2020 for for scrub.

This has gone ballistic, this change has clearly been very successful. 

Jordan Buckner: That's really exciting. And so I think , for brands, right? If it is really part of your strategy to get into locations like Sprouts definitely go through some of these programs. Any other lessons that you've learned along the way , for brands either getting into the innovation set or getting there?

Luke Abbott: Yeah, I think one of the things that I really want brands to think about is, you know. Hey, I got you. You gotta authorize the innovation set. Like do you have the money to really support it to make sure you're doing the marketing levers that we talked about earlier, to succeed? Also, is it something that you really want?

The, there is the opportunity now with innovation set to do regional watch or a couple of regions. Those are often through pot boots as opposed to doing the whole country. I mean, Jordan, you work with a lot of, and it's a lot of your time with emerging brands as I have in my career. And, you know, I just want people to just pause and this, I think there's like, oh my gosh, I got selected.

I'm going national. Okay, but do, are you gonna be able to [00:13:00] support it, right. Or do, do you have the capital to support the marketing levers? , or , do you, have you built a community of 30, 40, 50,000 people or more across the country that you can tap into to drive intent to buy into those stores if you have none of that, but it's like, okay, well, do you have.

The best. This is like clearly an amazing product with the best packaging at the right price, at the right time, and like based on at least some validation, you truly believe that even without marketing levers, you can drive, you can push this thing out. Then , that's the type of mindfulness that I really challenge people on an appropriate way.

Right? It's like, hey, just really consider this, like what you're getting yourself into. 

Jordan Buckner: Yeah. I mean, that's so true because with my brand TeaSquares, I had launched into retailers and like try it out. And I mean, you know, when we launched in Jewel ASCO stores and, you know, date came, but for our product, it yeah.

Was not part, I think we still had some product market fit work to do. We were distributed across, I think at the time, 169 of their locations in the Midwest. And the product basically didn't sell on its own. We didn't have the marketing [00:14:00] support it, and we ended up getting pulled like. A year into being on the shelf there and that still all that time and energy going into it just to learn that like, oh, this actually wasn't for me.

And it is a big waste. I wouldn't say waste, it was a learning experience, but we spent time and money on that instead of focusing and really doubling down on what worked. 

Luke Abbott: Yeah, exactly. I'm a big fan of like, Hey, I started out at Farmer's Market, I went some local retailers, and at each of these steps you're getting feedback, you're learning at the local retailer.

I'm actually delivering myself. Maybe I'm doing demos, I'm getting feedback, I'm learning , and then I don't find off more than I can chew. Right. It is, I call it. I think what, I forgot the book. It'd be good to, great. I think it was the book that talked about this idea of bullets. See pour cannonballs, right?

Like shoot the bullets at your target at looking for the target because bullets are cheap. Once you hit the target, then shoot the cannonball. And so the question is whether there sprouts a cannonball for you or not, right? if it's, you're still shooting the bullets and then maybe it's a regional watch you do, unless you're really, really confident and especially if you have the capital, then fine.[00:15:00] 

Right? But if the capital, if you're more capital constrained, just be more aware. 

Jordan Buckner: That's cool that you can launch into different regions , of Sprouts. What are kind of the approximate store counts that you can launch into in the region? Do they kind Yeah. A minimum or 

Luke Abbott: Great question. Yeah. We have a brand right now that just I think is launching right now into tomorrow, into, that's a hotshot of brand.

And launching into just Phoenix stores. I believe it's like 28 stores, and I believe in Southern California. It's like 30 stores, something you can, if you're based in SoCal, for example, , and you could go visit and do demos at all those 30 stores. That makes a lot of sense. I, you know, again, speaking from you, what I've noticed, , it's, do the regional launch sometimes might mean you need to go do a national launch next in terms of an innovation set and then go to the main line. So there's maybe multiple hops, but maybe that's okay, right. It it doesn't have to be tomorrow and, you know, we have to be really careful with capital for most emerging brands.

So it's just that that could be a much more safe and sane way to go. 

Jordan Buckner: Yeah, we definitely do. I mean, switching gears a little bit, but that's just reminded me, I think one thing that. A [00:16:00] lot of new brands experience is that rush to like drive revenue and get sales in early in their business. Mainly because you need the cash to keep your business going.

And so if you're don't have a lot of investment, then you're like, oh, these large orders sound great because I'm gonna get some. Promise of cash up front. A lot of times you don't always get the full amount and they don't always repeat and there's a lot other investment, right? 

Luke Abbott: No. Yeah. I can't tell you.

Many people have told me, oh yeah, look, I got into Kroger nationally is my first customer. Now he is last. How's that going for you? And it's like, been a year. It's like, it's not good. It's not good. It's not good. Yeah, so I, , we really. Like , that pathway to growth is so important that I think it was, I've said this to before, Jordan in other times together, but it's all we have is a hypothesis.

Yes. Right? A hypothesis that we need to validate step by step by step by step. I. It's can be kind of hubris to think, oh, I knocked it outta the park. I don't know anyone that ever, the first iteration, even op, if you follow them, , their [00:17:00] packaging is nothing like the original packaging when they were so disciplined and only did Northern California stores that first year.

That was it. 

Jordan Buckner: Well, and even with op founders, they actually had another pro or pre or probiotic brand before that, that they were in years that ended up closing down and before anything, and it worked out. 

Luke Abbott: Exactly, exactly. The hypothesis fail, but then they learn from the hypothesis testing and then they try the next hypothesis, which went ballistic.

Jordan Buckner: I love that. And I think that's so important for everyone to listen. So you'll find those opportunities start small where you can grow in a managed way, and then once you figure out what that launch and grilled formula is, then you can start taking some of those bigger steps and bigger swings. So absolutely love that.

Luke Abbott: by the way, we also had brands. I mean, a lot of brands who have their first big retail customer was Sprouts out of the gate and in the innovation, and it has been successful and they're good. I just ask for people to be really mindful , about what it all means. 

Jordan Buckner: As you mentioned, brands can go on , and apply for directly for that innovation set.

But one thing I always recommend is if you're serious about it, find someone who's like doing this [00:18:00] every day. You're talking with the Sprouts teams in various capacities every day, so you know, there are systems inside and out. What's the best way for brands to get in touch with you?

Luke Abbott: Thank you for asking. Going to my website, V as in victor, driven.com. There'll be a automatic popup that will, you can enter your email address and I would be happy to talk to anyone and also have a great team around me that is really here to support emerging and scaling brands. 

Jordan Buckner: Awesome. I love that.

And mention Foodbevy sent you. If you want an introduction over to Luke, reach out to me. I'm happy to send over an introduction as well. Luke, thanks so much for being on the show today. 

Luke Abbott: You're very welcome. Thank you for having me.