Sweetgreen: The Salad Specialist is Expanding its Menu and Increasingly Relying on Robot Kitchens

Sweetgreen (NYSE: SG) is a company specializing in salads. It offers a diverse selection of fresh salads made with seasonal and sustainable ingredients. The menus vary by location and feature creative combinations of vegetables, proteins and dressings. Customers can build their own salads or choose from pre-made options. In addition to salads, Sweetgreen also offers hot bowls, wraps and beverages such as homemade lemonades and iced teas. Sweetgreen sets itself apart from its competitors primarily through its sustainable sourcing and use of fresh, local ingredients. It also adapts its menus to the seasons and the availability of fresh ingredients. The focus on technology should also be emphasized. For example, Sweetgreen is testing an automated salad preparation machine ("Infinite Kitchen"). The wider roll-out could further improve the costumer experience and significantly reduce labor costs.

Sweetpass is an important growth driver
Sweetpass (free version) and Sweetpass+ (subscription mode) were both launched nationwide in April 2023. Since then, they have proven to be very effective customer acquisition strategies. Sweetgreen relies on its app. Essentially, this gives SG direct access to consumers' phones, bypassing all the middlemen who charge fees to market to consumers. SG is also able to collect a huge amount of consumer data, such as preferences and food type. When the time is right, SG can simply send a push notification to promote products that might appeal to the consumer. The initial trials seem to have gone very well, as management highlighted the successful pilots and also talked about the opportunities for personalization and marketing to increase frequency and sales growth through the program.

Product innovation continues to support growth
Another growth driver is SG's menu innovation. Again, this strategy of shifting to adjacent food products can be seen in many quick service restaurant strategies (e.g. Wendy's shifting to breakfast products, Starbucks shifting from coffee to breakfast products, etc.). With SG offering healthy products such as salads, it's only natural that they move further into this area, which they have done with the introduction of Protein Plates. This is a big step forward as it allows SG to cover a larger portion of the consumer's budget for daily meals - especially dinners. Management noted that the launch of Protein Plates has exceeded internal expectations in the first 60 days and has helped to drive revenue in the stores.

The robotic kitchen Infinite Kitchen offers potential to increase margins
With Infinite Kitchen, the company aims to become the market leader in restaurant automation. This technology was first introduced in a restaurant in 2023. Customers place orders via a tablet, which instructs the system to automatically place ingredients prepared by humans into the bowl. Customers receive their desired salads and meals by robot, which can process up to 500 orders per hour - around 50% faster than humans. Seven new Infinite Kitchen restaurants are expected to open this year and three to four large city restaurants will be retrofitted with the Infinite Kitchen.

Conclusion: Total sales in the first quarter of financial year 2024 amounted to $157.9 million, an increase of 26% compared to the same period last year. 41 new restaurants were opened and same-store revenue increased by 5% due to menu price increases. The forward PS/ 2025 ratio is 3.7. The share is not cheap, but the growth opportunities are great.

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