"Product Sense" and Longevity in Retail

Operating in eight states and set to expand, Sprouts Farmers Market (NASDAQ: SFM  )  describes itself as a neighborhood grocery store specializing in healthy living for less. CFO Amin Maredia joined the Fool to talk culture, margins, growth, and more. A CPA and Harvard Business School alum, Maredia joined Sprouts in 2011 after serving at major companies including PricewaterhouseCoopers and Burger King (NYSE: BKW  ) .

Many companies talk in terms of a customer-centric approach, but Maredia prefers the term "product sense," which goes beyond understanding what the customer wants to include product innovation as well.

A full transcript follows the video.

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Brendan Byrnes: Let's talk about your recent IPO. It popped over 100% and it's maintained that, pretty much. Could you talk about the process leading up to the IPO, what that was like, and also how Sprouts changes now, as a public company?

Amin Maredia: This was my third IPO. I think that, from a company standpoint, if anything it's been a positive because it's allowed our brand to get out in the public marketplace a little bit more. As far as changes, we're laser-focused on the four tenets of the business, and focused on opening the stores right, focused on training in the stores, focused on growing talent within the stores.

One of the things I think is a positive benefit of becoming a public company has also been that attracting talent has become even easier. Over the last year it's been incredible, some of the people we've been able to hire. I've been in scenarios where somebody comes in to interview, and I sit back and reflect -- because I've come from $20, $30, $40 billion companies and you step back and go, "Am I going to be able to attract this person?" -- and the same night you get an email from that person, who's passionate about coming to Sprouts. That's fun.

Really, as we go forward it's so important to the success in the future for the company.

Byrnes: Let's talk longer term, maybe 10 years out. What are some of the big drivers that investors can expect if they're going to hold the stock for a while, like we would; we're long-term investors here. Not in and out. If they were looking for the long-term trends, what are we doing?

Maredia: Well, we hope every investor is like Warren Buffett; buy the stock and put it in the drawer!

Byrnes: Yeah, exactly. His favorite holding period is "forever."

Maredia: I think what I laid out in terms of our four key things -- of healthy food, service, value pricing, and selection -- is something that, baseline, we have to continue to do as a company. Culture and building talent; that we have to continue to do. We have a great leadership team who has been at $10, $20, $30 billion companies in their past, so who knows how to grow the company, so we're not worried about that.

Then when you think about five to 10 years out, you've really got to step back and reflect and look at food retailing and customer-facing companies. There's a lot of research, and you see a lot of the successful companies; you mentioned some. Whether it's Apple or McDonald's ... I actually like 7-Eleven. It's been a very successful retailer over the last decade.

You look at companies that sustain, and what have they done really well? When I was in business school, if I've learned one thing in business, it's that you hear the term "customer-centric" sometimes, but I like to use the term "product sense."

For us to be successful long term, we've got to have good product sense. That to me means one, product innovation has to be there, and second you have to really focus on the customer and what the customer wants. Sometimes, the customer may not know what's coming up, and that's where product innovation plays a key role.

Today, health, selection, value, and service are our key tenets. As we go forward, there may be different things. Today we're looking a lot at how do we engage more with the customer, just not in our stores, but outside the store?

We send over 11 million fliers to our customers every week, and that's one point of engagement. We're starting to look more and more at social media engagement and have some fantastic platforms that we're building out to engage with me, talk to me as a consumer -- because remember we cater from the everyday supermarket customer to the lifestyle customer.

There's a lot of young people who are coming into our stores, and the millennials more and more are looking for knowledge, and are looking for ways to understand attributes in products. They're not just looking for that big brand; the Coke or Pepsi or Tide. They're looking for "What's actually in my product? What is the attribute of the product?"

That's exciting for us, and it plays right into our wheelhouse, so we have some pretty exciting things under way to build on that. The bottom line is, as we grow as a brand we've got to continue to widen our moat. When we see our service scores -- which are way higher than your conventional supermarkets -- that's not good enough for us. It's continuing to widen the moat, continuing to look forward, to the side, and to the back.


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