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Sprouts Set to Begin Conversions

Sprouts Set to Begin Conversions

PHOENIX — Sprouts Farmers Market here said it will begin re-branding the 37 Sunflower Farmers Market stores in July, following the announcement last week that the merger of the two companies has been completed.

Banner conversions will continue in phases through the end of the year, Sprouts said, including new exterior and interior signage, updated fixtures and an expanded merchandise mix.

Sprouts said it will remain headquartered in Phoenix, while the corporate offices of Sunflower in Phoenix and in Boulder, Colo., will be consolidated into the Sprouts headquarters.

“Everyone at Sprouts is eager to work with the Sunflower team to build a stronger company,” said Shon Boney, chief executive officer of Sprouts. “In joining forces, we will create a company that is not only bigger but also better — and continue to provide our signature shopping experience with a strong commitment to value and natural products.”

2012 SN Top 75: Sprouts Ranked No. 68 Before Merger

Company officials could not be reached for additional comment last week, leaving up in the air the question of who will supply the combined company, since each buys from a different distributor — Sprouts from Nature’s Best, Brea, Calif., with United Natural Foods Inc., Providence, R.I., as a secondary supplier; and Sunflower from UNFI.

Industry sources said it’s possible other distributors will try to pick off the Sprouts account.

Speaking with SN in March, just after the proposed merger was disclosed, Sprouts President Doug Sanders said he expected the deal to produce economies of scale “that should be extremely impactful.”

“After [the acquisition of Henry’s Farmers Market and Sun Harvest Markets in 2011], we were able to renegotiate quite a few contracts with suppliers and to take advantage of the new size of the company, and we expect to do that again after this merger is completed.

“With greater size comes greater leverage, so we intend to go back and work with our existing suppliers and with companies new to Sprouts to get new items and better terms.”

2012 SN Top 50: Sunflower Ranked No. 30 Before Merger

Combining the Sprouts and Henry’s private-label programs was one of the biggest processes in the integration of Henry’s with Sprouts, Sanders said, and he was anticipating a similar undertaking with Sunflower.

“Sunflower has a strong private-label program that we believe will enable us to increase our selection and item count,” he explained, “and we’re excited to start working with the Sunflower team to find additional best practices for both of us.”

Sanders said Sprouts does not expect sales to suffer during the re-branding process — based on its experience integrating 43 Henrys and Sun Harvest stores last year — pointing out that sales at those stores rose 3% to 4% through the re-branding period and beyond.

The combined company will operate 144 stores — including the 37 Sunflower locations — with six more units scheduled to open this year. Revenues for the year are projected to approach $2 billion.

Stores at both companies range from 27,000 square feet to 30,000 square feet, Sanders said. “The layouts, the assortments and the sales per store are basically identical, as is the look and feel of the two companies. So if someone were dropped into one store without knowing whose it was, I’m not sure he could tell the difference.”

The addition of the Sunflower stores expands the Sprouts footprint into Nevada, New Mexico, Oklahoma and Utah and extends its presence in Arizona, California, Colorado and Texas.

In the interview in March, Sanders told SN the merger may provide a springboard for additional growth. “[It] positions us for growth in the future. It expands our geographic reach to four additional states, and with a larger geographic footprint, Sprouts can expand to other states.”

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