Trader Joe’s Founder Again on a Solo Path : Time for Grocer to Tackle a New Venture

For more than 20 years, Joseph H. Coulombe has blazed his own trail as founder and operator of Trader Joe’s markets.

While other food markets opted for bigger stores, he kept his small. While the supermarket chains catered to the mass market, Trader Joe’s set its sight on serving well-educated and well-traveled consumers. And while the supermarkets featured aisle after aisle of mainstream fare, Trader Joe’s filled its stores with low-priced but hard to find items ranging from obscure imported wines to tofu-filled burritos.

It is a strategy that has helped the 27-store chain--part gourmet shop, part discount house--survive in Southern California’s tumultuous food store industry. But now Coulombe is ready to go on his own again as he plans to leave the chain at year-end to begin a new project.

And what is that next project? “I don’t know,” said Coulombe, who narrates the company’s radio commercials. “What I’m trying to do is to have a complete open mind. I’m getting one phone call a day from people trying to finance me in what ever I want to build. I’m just trying to clear my mind of doing the same thing for 30 years.”

The next chief executive at Trader Joe’s, which was sold 10 years ago to the wealthy Albrecht family of West Germany, will be John Shields, 56, who has been president of the company since last November. Shields said he plans no major changes at the chain.

That might be a wise thing, analysts say, since Trader Joe’s unconventional approach to shopping is part of the chain’s appeal. “It has a very distinct personality,” said Ron Rotter, a retail industry analyst at Morgan, Olmstead, Kennedy & Gardner. “It has a cult of customers who love going there to see what new wines have arrived. Such customer loyalty, says Rotter, is unique these days.

Although his stores have been compared to expensive gourmet shops, Coulombe argues that Trader Joe’s is not in the same league with pricey grocery stores catering to the wealthy. Customers will not find valet service at a Trader Joe’s. In fact, the stores display many products in their original packing cases much like warehouse supermarkets. And Trader Joe’s reputation for low prices, particularly on wine, have won it many fans among sophisticated middle-income shoppers.

“We don’t regard ourselves as a freak import shop,” said Coulombe. “We are not a very highfalutin’ outfit. My basic customer is a school teacher making $28,000 a year. They are on a limited budget. Our merchandise is geared to this type of person.”

Coulombe opened the first Trader Joe’s in 1967 in an effort to salvage part of his convenience store business--Pronto markets--that faced stiff competition from the giant 7-Eleven chain. Trader Joe’s would cater to the fast-growing number of sophisticated but budget-minded consumers. It was a success, and the stores have made a profit since, Coulombe says.

Coulombe has been recognized as quick at spotting trends, according to industry officials. “In 1971, health food became a very big thing,” Coulombe said. “A few years ago, frozen seafood became big. We try to stay right out in front. Right now the big thing is oat bran.”

“Ten years ago we didn’t know what the term ‘yuppie’ was, but he was attracting them then,” said Steve Koff, president of the Southern California Grocers Assn.

Kept Them on Their Toes

Although Trader Joe’s--with annual sales of about $145 million--never threatened any of the established supermarket chains, it may have affected their thinking, say industry analysts.

“I think what Joe did was keep the supermarkets on their toes,” said Tom Pirko, an industry consultant. With cut-rate prices and splashy marketing, “he could bring customers in and spend dollars.”

Coulombe could have left Trader Joe’s to start a competing chain two years ago under his employment contract. But he says he chose to stay with the chain long enough to see it open stores in Northern California--its first expansion outside Southern California--and to put a new trucking and warehousing system into place.

“At age 58 I had to make a decision,” said Coulombe from his South Pasadena headquarters. “If I was going to leave, this was the time to do it if I was going to tackle a major project.”

Coulombe will hand over control of the chain to longtime friend Shields, a former department store executive who admittedly has little experience in the grocery game.

That is not a major concern to Coulombe, who says Shields’ marketing and retailing skills will come in handy. “We are not a conventional grocery store. We’re closer to the fashion business than the supermarket business.”