Long a Southern California staple, Trader Joe’s Co. has grown into a national chain over the past decade by doing the opposite of its larger peers.
There’s no diaper aisle at Trader Joe’s, and no coupons are accepted. There’s no self-checkout stand or deli counter. And there’s definitely no ecommerce option.
In other words, many of the things consumers have come to expect from larger grocery chains like Albertsons Cos. Inc. or even Whole Foods Market Inc. are nowhere to be found at Trader Joe’s.
And that seems to be a big part of the appeal for the Monrovia-based chain, which now has nearly 500 stores in 42 states. (Sorry, Alaska and Hawaii shoppers, Trader Joe’s says its supply chains don’t stretch far enough to support locations there.)
Consumers who frequent Trader Joe’s are drawn in by the kinds of quirks that have made the brand a success since Stanford graduate Joe Coulombe opened his first store in Pasadena in 1967 to cater to the “overeducated and underpaid.”
Among the chain’s unique elements are employees sporting Hawaiian shirts, holiday cookies that have developed a cult-like following, and parking lots that always seem too small and too crowded.
“It’s such a unique culture,” said David Livingston, a grocery store consultant who estimates that some urban Trader Joe’s stores pull in about $1 million a week. “They are a very, very private company. They don’t play in the sandbox with other children.”
The formula seems to be working. Trader Joe’s has appeared on the Los Angeles Business Journal’s annual list of top private companies every year since 1995, nearly always ranking in the top 10.
This year, Trader Joe’s is the No. 1 privately held company on the list with estimated revenues of about $16 billion. It’s a figure the company won’t confirm. Unlike Trader Joe’s competitors, analysts say the chain operates without heavy debt loads.
Trader Joe’s stores are small — usually 15,000 to 20,000 square feet compared to the 50,000 to 80,000 square feet of larger chains’ grocery stores — but they generate one of the highest sales-per-square-foot figures in the business.
Life before Joe’s
Before Coulombe opened Trader Joe’s, he launched convenience store chain Pronto Markets while he worked for Rexall Drug Co., at the time the largest drug store chain.
Coulombe left Pronto but later bought the chain. After his Pronto financer, Adhor Milk Farms, bought 7-Eleven Inc., however, he decided to switch gears. Inspired by a Scientific American article that said 60% of Americans were going to college, he changed his focus.
“Pasadena, where I opened the first one, was because Pasadena is the epitome of a well-educated town,” he told the Los Angeles Times in 2014. “I reframed this: Trader Joe’s is for overeducated and underpaid people, for all the classical musicians, museum curators, journalists — that’s why we’ve always had good press, frankly!”
Coulombe eventually sold Trader Joe’s in 1979 to Theo Albrecht, a German grocer. Albrecht’s company, Aldi Nord, still operates Trader Joe’s in the United States, where it has remained in trust since 2010 when Albrecht died. Coulombe retired in 1988 when there were fewer than 30 Trader Joe’s stores.
A different tack
From its inception, Trader Joe’s took a different tack for its advertising. Coulombe would buy radio spots but never took out newspaper ads. The brand never showed up on television. Instead, the company launched the Fearless Flyer, a newsletter spotlighting different products, which served as its conversation with customers.
And when the digital age arrived, Trader Joe’s passed on online ads. The brand doesn’t even go all-in on social media.
The chain also refuses to sell online, which has created a cottage industry of rogue customers who hawk holiday cookies and other items online.
Trader Joe’s doesn’t give out revenue data or any other information about product sales.
But last year, the notoriously private company began a podcast in which it defines its own heritage and narrative, touching on subjects ranging from Trader Joe’s founders to sustainability. It’s a window into the company’s workings and history.
Earlier this year, Trader Joe’s also quietly started a YouTube channel where it features product recipes.
Location, location, location
It’s not unusual for a new Trader Joe’s to receive a celebrity-like reception. More than 100 people waited in line in a drizzle for a recent store opening in Meridian, Idaho. Other stores attract hundreds of customers on opening day.
But don’t look for a Trader Joe’s, with its dark chocolate, Two-Buck Chuck and orange chicken, to open in Alaska or Hawaii anytime soon.
Alaskans have a Facebook page trying to lure Trader Joe’s north, but executives say logistical and operational challenges make that tough.
“While these markets are intriguing and we keep looking at them, we continue to work on these challenges,” Chief Executive Dan Bane said in December in the “Inside Trader Joe’s” podcast.
For the most part, analysts say, Trader Joe’s executives have stuck to a selective process for choosing markets.
“They are only going into metro areas with a demographic earning six figures within the first few miles,” said Matt Casey, a grocery store analyst. “They like to see a median age around 45 and a more health-conscious shopper.”
Trader Joe’s locations are often found near hospitals or universities where educated, well-paid consumers are more likely to be found.
The company has been steadily expanding. Executives began an out-of-state expansion in the early 1990s, a few years after Coulombe retired.
Under Bane, who has served as CEO since 2001, the regional chain went national.
“We’re targeting to open 30 to 35 stores a year in the 48 states,” Bane said in a May 2018 podcast.
This year, the company has opened more than a dozen stores. “We won’t open a store just because we can,” Bane said on the store’s podcast. “We want to open a store that’s run by the right kind of people doing the right kinds of things, and that’s really important to us.”
Casey said the company frequently transfers employees to new stores, bringing with them valuable knowledge about established stores.
Bane said the company picks sites “based on a proprietary sales survey model. We don’t really consider competition as part of the review because we found that our format will draw customers regardless of the competition.”
Private labels
About 85% to 95% of Trader Joe’s products are private label, giving the company more control of its brand than any competing supermarket.
That means the company orders everything from its green juice to its pita chips from a third party, with products made to Trader Joe’s specifications. Trader Joe’s has revealed in its podcast that it has a secret tasting panel that determines what makes it on the shelves.
Foodies and journalists have made a game out of guessing who is behind some of these labels, but the intensely private company has for the most part kept its vendors a secret.
The longstanding arrangement, as Coulombe saw it, made for fewer distractions.
“You didn’t have to worry about all of the soft drink salesmen coming in, and the bread salesmen coming in, and the potato chip people coming in,” the octogenarian said during one of the company’s first podcasts. “You’re just focused.”
