Expect to hear more from Sweetgreen about value and protein.
The fast-casual chain on Thursday said it’s working on improving its value proposition, and that will involve a review of the entire pricing architecture.
“We know that we can do a better job of creating clear entry prices and logical trade-up opportunities across our create-your-own and chef-curated menu options so that our customers understand the value across every menu here,” said CEO and co-founder Jonathan Neman. “When guests know what they’re getting and feel good about it, it builds trust and drives loyalty over time.”
In addition, next week the chain plans to launch a campaign that will highlight nine chef-curated dishes with more than 30 grams of protein, as well as a calculator to help guests count their “macros.”
That will give the chain an opportunity to promote its 25% bigger scoops of chicken and tofu, launched earlier this year. That effort was also aimed at protein-crazed guests, but perhaps even more to improve the chain’s value perception.
The moves come as Sweetgreen struggles to reverse a deepening downturn in sales.
During the third-quarter, Sweetgreen’s same-store sales plunged 9.6%, including an 11.7% decrease in traffic and product mix that was partially offset by a 2.2% benefit from menu price hikes implemented earlier in the year.
Like others in the fast-casual segment, Neman blamed softer spending among younger consumers, aged 25 to 35, who are particularly pressured in the current economy.
Neman said Sweetgreen’s sales suffered, in particular, in the Los Angeles and New York City markets, which represent about 60% of the chain’s comparable sales base.
But the economy wasn’t fully to blame.
Earlier this year, Sweetgreen said about two-thirds of its restaurants were not operationally up to par. The chain launched a comprehensive improvement plan, called Project One Best Way, that establishes clear standards and accountability.
Today, about 60% of Sweetgreen’s 266 restaurants meet the operational standards, but the work will continue, Neman said.
The brand is also investing in marketing, working on messaging that will emphasize the quality of ingredients, including chicken raised without antibiotics, organic and local produce, the lack of artificial flavors and dyes, and seed-free oils.
But Sweetgreen, however, has increasingly come under fire for high menu prices. The brand has a reputation for bowls that are $15 plus, which can seem out of reach in today’s discount-heavy environment.
Earlier this year, the chain experimented with promotions of a $13 weekly bowl drop, which Neman said helped the chain understand more about price elasticity.
“We saw a lot of engagement around it, but given the fact that it was mostly marketed to existing customers, a relative high degree of cannibalization,” he said. “But it did show us that there is a real opportunity around more entry price points around our menu as we look at menu innovation.”
And there are new menu items—including possibly new hand-held items that were not specified—coming.
“A lot of the pricing work is going into stage gate in the coming months, and we do think that there’s going to be a lot of opportunity around the different pricing tiers,” he said.
Meanwhile, Sweetgreen is slowing development next year to focus more on operations.
This year, the chain is on track to open a net of 37 new restaurants, including 18 that feature the robotic Infinite Kitchen model.
Next year, however, Sweetgreen expects to open between 15 to 20 restaurants, about half of which will be Infinite Kitchens.
“We believe this strikes the right balance between growth and financial discipline,” Neman said.
Sweetgreen also announced that it is selling the Spyce technology division that developed the Infinite Kitchen technology.
The move is designed to strengthen Sweetgreen’s balance sheet, and the deal will allow the chain to continue opening Infinite Kitchen locations. But the burden of improving the technology will fall on Wonder, the super mealtime app, which purchased the technology for $100 million in cash, and about $86 million in stock.
For the year, Sweetgreen’s outlook got worse.
The company now expects same-store sales to decline between 8.5% and 7.7%, a gloomier projection from the 6% to 4% decline stated at the end of the second quarter.
Jamie McConnell, Sweetgreen’s new chief financial officer, said the chain had initially seen sales pick up in July with the launch of the summer menu. But then sales took steps down in both August and September.
“October is holding flat to September, so we’re running at low negative double digits right now,” said McConnell. “The 25 to 35 [year-old] consumer is the most under pressure, and they make up about 30% of our consumer base. And they’re down 15%.”
Sweetgreen is also seeing declines at the dinner daypart, which just last year, the brand had begun to build significantly.
Following the earnings call, Sweetgreen’s stock, which was already close to 52-week lows, plummeted more than 11% in after-hours trading.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.