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The World According to Trader Joe’s

A look inside the tireless cultural phenomenon—yesterday and today—including its notable take on private label.

March 12, 2013
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Trader Joe's at a Glance

 

Company Name:

            >          Trader Joe’s

Founded:

            >          1958

West Coast

Headquarters:

            >          Monrovia, Calif.

East Coast

Headquarters:

            >          Boston

 

Stores:

            >          395 (as of Jan. 2013)

Employees:

            >          Approximately 10,000

 

Back in the late 1950s, before the Hawaiian shirts, cedar planks and hidden parrots, there was Pronto Market—more of a convenience-store concept, with units scattered around greater Los Angeles that, beyond beer, wine and liquor, added specialty attractions like house-packaged nuts and cheeses, as well as fresh-squeezed orange juice. The concept was initiated by the Rexall Drug Company—seeking to expand from pharmacies into C-stores—and a young, enterprising 26-year-old named Joe Coulombe was charged with leading the new division.

But competing in the C-store arena with entrenched, big-business muscle like 7-Eleven quickly proved unduly intimidating, so—despite Coulombe’s solid expansion of the Pronto concept through the years—Rexall decided to close the Pronto Market division in 1966. While considering next steps, Coulombe retreated to the Caribbean to dream of the future.

Enter the Hawaiian shirts, cedar planks and hidden parrots.

After returning refreshed from the sea, surf and sand, Coulombe set about making his dream a reality. He acquired Pronto Market from Rexall and started crafting a new concept that would distinguish itself in the marketplace. He dubbed the new store Trader Joe’s, opening his first unit in South Pasadena, Calif., in 1967. In short order, the remaining Pronto units were converted into Trader Joe’s, and an iconoclastic grocery legend was born.

 

Expanding the Concept

Coulombe sought to craft a concept that catered to the growing number of increasingly worldly consumers. This translated into his tactic of stocking the store with rather-unique products sourced from around the world, including relatively unknown beers and wines, with many products branded under Trader Joe’s private-label lines—an approach that continues today. A key marketing drive was embodied in the chain’s flyer, initially called the Trader Joe’s Insider Report and eventually dubbed the Fearless Flyer, ever-laced with wry humor and a fine example of the power of content-driven marketing.

The innovative approach to private-label foods espoused by Coulombe eventually caught the attention of the Albrecht brothers, the renowned founders of ALDI (a global giant in private label), and Theo Albrecht purchased Trader Joe’s—keeping Coulombe on as CEO—in 1979 (Coulombe eventually retired in 1988). With Albrecht’s funding, Trader Joe’s steadily expanded over the next several years throughout Southern California, cultivating an image that appealed to consumers seeking something different—a concept that maintained an upscale image, but typically at relatively affordable prices, in stores that sometimes feel downright cozy. While industry insiders have noted that the chain is currently looking into larger-footprint stores, traditionally, Trader Joe’s locations have been on the relatively small side, spanning around 8,000 to 12,000 sq. ft. The wide-ranging approach to product sourcing, typically making use of multiple independent suppliers, often meant that store inventory rotated on a regular basis—customers weren’t (and still aren’t) always guaranteed that a given product will remain available over the long-term. But this inconsistency didn’t (and still doesn’t) faze its loyal customer base. By 1989, sales for the chain—around 30 units at the time—hit $150 million. By the early 1990s, the chain expanded northward to the San Francisco Bay Area, and sales had grown by another $100 million.

But that was just the beginning.

Soon, expansion broke the boundaries of California, with stores established in Arizona, Oregon and Washington, and by the mid-1990s, gross sales had hit around $600 million. Not long after, the East Coast was exposed to the idiosyncratic chain, with units opening in New York City, Boston and Washington, D.C. By the time 2000 rolled around, stores had also been established in key markets in the Midwest. In 2002, the chain had 160 stores in 15 states and sales hit $1.67 billion.

Today, Trader Joe’s operates upward of 400 stores and pulled in an estimated $8.5 billion in sales for 2011 (equating to estimated sales of $1,500 to $1,750 per square foot, far and away leading the industry in that metric)—and all without the support of couponing, or print or television advertising (it has run radio ads, always with friendly undertones of trademarked whimsy, since the 1980s). The “cult of Joe’s” persists with such intensity that towns lacking a store often relentlessly petition the chain to establish one, fan websites have been created, hundreds of Facebook pages are dedicated to attracting a store, and dozens of books have been written about the company.

Captains of Private Label

The success of Trader Joe’s is all the more notable when considering that it stocks a significantly lower number of SKUs compared to other grocery chains (around 4,000 compared to the tens of thousands at other chains) and that around 80% of its products are private label.

Trader Joe’s maintains a tight lid on its private-label sourcing agreements, and widespread industry and consumer speculation persists regarding which major brands are hiding under those Trader Joe’s private labels (a buzz that only further drives sales). The chain bills itself as “Your Neighborhood Grocery Store” while its buyers travel the world in search of unique foods, all without seeming to contradict itself. It’s local and global all in one.

Taking its store branding to another level (akin to the 365 Everyday Value products at Whole Foods Market) is the fact that, since 2007, all products under the Trader Joe’s private label, including its playful ethnic brands like Trader Giotto’s, Trader Jose’s and Trader Ming’s, along with the seasonal/regional Pilgrim Joe’s, are manufactured according to some rather-tight guidelines:

  • No artificial flavors
  • No synthetic colors
  • No preservatives
  • No monosodium glutamate (MSG)
  • No genetically modified (GM) ingredients
  • No trans fats

The chain is also ahead of the game with its own packaging icons indicating whether one of its private-label products is gluten-free, vegan, vegetarian, fat-free, a “quick meal,” kosher or low-sodium.

The perishables sections at Trader Joe’s often feature private-label foods in-step with—or helping set—current culinary trends, including refrigerated products like:

  • Chicken Sweet Apple Sausages (lower-fat, flavor-forward)
  • Heat-and-eat Chicken in Red Curry Sauce (Indian cuisine continues to gain U.S. traction)
  • Fully cooked Traditional Carnitas (convenient diversification of Mexican options)
  • Kale & Edamame Bistro Salad (value-added produce is selling well these days)
  • Reduced-Guilt Spinach & Kale Greek Yogurt Dip (lower-fat, lower-calorie and anything with Greek yogurt is hot)
  • Soy Chorizo (diversified charcuterie is emerging, so why not a vegetarian option?...)
  • Cheddar & Gruyère Mélange (interesting cheese blends are drawing attention)
  • New Zealand Grass Fed Sharp Cheddar (watch for more grass-fed dairy to surface)

The chain also stocks seasonal products, like Peeled & Cubed Butternut Squash, a value-added produce option to make quick work of butternut squash soup and other dishes. Other seasonal items of note have included Chocolate Cheddar Cheese (dark chocolate marbled into the cheese), Pumpkin Chocolate Mousse Cake, and Pumpkin Ice Cream. It’s Vintage Ale, brewed for Trader Joe’s by Canadian craft-beef powerhouse Unibroue and bottled in the 750 ml bottles common to many Belgian beers, has also cultivated quite a cult following.

When it comes to its frozen private-label foods—particularly convenience foods—Trader Joe’s truly shines, often setting the pace for the rest of the industry. Consider this assortment of current offerings:

  • Steelcut Oatmeal (yes, in the freezer case, in individual-serving “pucks” accented with maple syrup and brown sugar—ready in 2 minutes in the microwave)
  • Aloo Chaat Kati Pouches (an Indian street food in a format akin to a chimichanga)
  • Cha Siu Bao (Chinese steamed pork buns, a dim sum staple)
  • Hake en Papillote (fish with grilled zucchini, cherry tomatoes and pesto wrapped in parchment that can be microwaved)
  • Tarte de Alsace (a take on a classic Alsatian tart—a pastry-style flatbread with ham, caramelized onions and Gruyère)
  • Sweet Potato Tots (expect to see ongoing increased demand for products highlighting sweet potatoes)
  • Organic Superfood Pilaf (frozen quinoa with sweet potatoes—see above item…—kale and carrots)

The predecessor to Trader Joe’s, Pronto Market, had a strong emphasis on beer, wine and liquor, and that tradition continues today. Trader Joe’s stocks a wide selection of offbeat (and well-known) beers and wines—with several carrying the Trader Joe’s private label, crafted by famous breweries like Gordon Biersch, Goose Island, Unibroue, etc.—and gained national notoriety with its “Two Buck Chuck.” In 2002, Trader Joe’s became the exclusive retailer of Charles Shaw wines, which originally sold for $1.99 a bottle (they’re now $2.49 in California, with prices varying a bit elsewhere across the country depending on requisite taxes).

Online, Trader Joe’s caters to its customers with a recipe database broken down by daypart (including Small Plates), and via its TJ’s Guides, which features several sections of topical content:

  • Fruits & Vegetables
  • Vitamins & Minerals
  • Fats
  • Rennet (detailing the differences between animal, vegetable and microbial rennet)
  • Nutrition Facts & Definitions
  • Wine Guide
  • Beer Styles

This section of the website also includes a handful of “How to…” pages on subjects like brewing the perfect cup of coffee, along with guides on olive oil, “Fish Prep Made Easy,” party planning and pairing foods and wines.

Trader Joe’s has seen significant growth since its humble C-store beginnings in 1950s Los Angeles—and for good reason. Its kitschy concept jibes with wide-ranging consumer demographics, its private-label program is an industry leader, and it regularly travels a leading edge regarding ethnically acculturated foods—just to name a few reasons for the chain’s popularity. In fact, Trader Joe’s was named the top-rated retail chain in terms of customer loyalty (tied with Wegmans at 73%), according to the 2012 “Net Promoter Industry Benchmarks” conducted by Satmetrix, San Mateo, Calif.

The rest of the industry will continue to keep tabs on what flies and what dies at Trader Joe’s—particularly in its private-label lines—and in turn, the chain will need to keep its concept and lines fresh as retail grocery chains across the country continue to progressively ramp-up their own private-label lines, a sector of the industry that has a particularly bright future. 

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Recent Articles by Douglas J. Peckenpaugh

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