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Graph coloring is one of the central problems in distributed graph algorithms. Much of the research on this topic has focused on coloring with Delta+1 colors, where Delta denotes the maximum degree. Using Delta+1 colors may be unsatisfactory in sparse graphs, where not all nodes have such a high degree; it would be more desirable to use a number of colors that improves with sparsity. A standard measure that captures sparsity is arboricity, which is the smallest number of forests into which the edges of the graph can be partitioned. We present simple randomized distributed algorithms that, with high probability, color any n-node alpha-arboricity graph: - using (2+epsilon)alpha colors, for constant epsilon>0, in O(log n) rounds, if alpha=Omega(log n log log n), or - using O(alpha log alpha) colors, in O(log n) rounds, or - using O(alpha) colors, in O(log n min{log log n, log alpha}) rounds. These algorithms are nearly-optimal, as it is known by results of Linial [FOCS'87] and Barenboim and Elkin [PODC'08] that coloring with Theta(alpha) colors, or even poly(alpha) colors, requires Omega(log_alpha n) rounds. The previously best-known O(log n)-time result was a deterministic algorithm due to Barenboim and Elkin [PODC'08], which uses Theta(alpha^2) colors. Barenboim and Elkin stated improving this number of colors as an open problem in their Distributed Graph Coloring Book.