SOUTHERN CALIFORNIA ENTERPRISE : Trader Joe’s Looks East : 68-Store Grocery Firm Plans to Conquer New Markets
Is Philadelphia ready for pineapple salsa? Will Bostonians munch on Mt. Baldy Mix? And will a cynical New Yorker be caught dead buying a bag of Spring Berry Crunch Granola?
The executives of Trader Joe’s will soon find the answer to these and other questions as they prepare to take one of Southern California’s most unusual and popular retail institutions--part gourmet shop, part supermarket and part discount warehouse--back East.
The growth-minded management of the South Pasadena-based chain is confident it can expand Trader Joe’s nationwide without losing its casual California character or its legions of loyal customers. Trader Joe’s can already be found in Arizona, and stores are scheduled to open this spring in Oregon and Washington state.
In fact, the 68-store chain has already undergone a carefully managed transformation and regional expansion in preparation for exporting Trader Joe’s Peanut Butter Dog Biscuits and Trader Joe’s Flourless Sprouted 7-Grain Bread to the rest of America.
With preparations underway for the first Eastern stores to open in two years, retailing industry observers and customers say they think Trader Joe’s will thrive far from its Southern California roots if it sticks to its formula.
“I’m originally from the East Coast, and I would have loved to have had one there,” Cathy Ross-Burden, a 39-year-old technical writer, said as she shopped at a Trader Joe’s in South Pasadena. “When I have (visiting) friends, I always bring them here. It’s Trader Joe’s, then the La Brea Tar Pits. Then it’s back to Trader Joe’s.”
In stores that resemble tidy bargain basements, Trader Joe’s customers can load up on the exotic--Jasmine Fried Rice and Salmon Burgers--and the mundane--oatmeal and canned tuna.
Despite its appeal to highbrow tastes, the chain prides itself on relatively low prices. One of the most popular products is a line of dried instant soups--with offerings such as Fat-Free Moderately Minestrone Couscous--for 79 cents each. “Special Buys” of discontinued merchandise from companies such as Ben & Jerry’s also attract bargain hunters.
“It’s a relatively down-to-earth place,” said Renee Florsheim, an assistant professor of marketing at Loyola Marymount University. Unlike a fancy gourmet store, “people are not intimidated by it. It makes you feel pretty comfortable about what you are buying.”
The loyalty engendered by the nearly 30-year-old chain is such that numerous communities have clamored for a Trader Joe’s of their own. “We desperately wanted them,” said Claremont City Councilwoman Diann Ring, who was mayor in 1991 when residents there tried but failed to woo the company to their town in eastern Los Angeles County. Ring even took company Chairman John Shields to dinner.
“We had more mail and calls on this issue than any tax increase,” Ring said. “The wives of university presidents wrote letters.”
The chain was once known primarily as a source for low-priced imported wines and other alcoholic beverages, but food now makes up 80% of sales at Trader Joe’s, which features its own private-label products. Eight food buyers dine at trendy restaurants, Shields says, attend food fairs and read countless publications in search of new items to keep customers from getting bored. Last year, 168 items were introduced.
On Tuesdays, the buyers have a taste testing of new products for flavor and price--only a few make it. During a recent testing, one of the winners was nitrate-free turkey sausage breakfast burritos, which will sell for $1.39 a package.
“We are a fashion food retailer,” said Shields, 62, as he sipped a Trader Joe’s All Natural Cola in his Spartan office at company headquarters. “People are coming to us expecting new things.”
Since Shields replaced founder and college roommate Joseph H. Coulombe in 1988--after Coulombe’s management contract expired and he left to work on other retail projects--Trader Joe’s has more than doubled in size to $608 million in sales last year. The company, which has been owned by the wealthy Albrecht family of Germany since the late 1970s, does not disclose profits.
“I have only one instruction from the Albrecht family: Just grow the company,” Shields said.
Whereas Coulombe relied more on intuition, Shields is more of a traditional corporate executive who uses focus groups, marketing surveys and demographics to help make decisions. Shields instituted a management training program, employee evaluations and established a standardized store layout.
“The basic culture is still there,” said Richard Payne, who manages a Trader Joe’s store in South Pasadena. “John Shields was able to come in and expand on that.”
Shields’ tenure was marred last month, however, when Trader Joe’s agreed to pay $225,000 in penalties and court costs over accusations brought in a civil suit that it falsely advertised wine prices. The company, which did not admit any wrongdoing, said it paid the settlement to resolve the suit, brought by the Orange County district attorney’s office.
With that resolved, the company can now concentrate on its expansion, which is driven in part by geography and demographics. Shields says the company will soon run out of places on the West Coast where it can draw from large pools of well-educated customers.
“If we want to continue to grow the organization, we have to look elsewhere to open stores,” said Shields, who sees room for only about 30 more West Coast stores.
But in doing so, Shields and his employees want to make sure the company’s corporate culture is not left behind. That’s why at first, only veteran West Coast employees will open up and manage the new stores.
But Trader Joe’s buyers will also have to take into account regional tastes as well as the scope of a much-larger organization. Buyer Kimberly Greenfeld said Trader Joe’s will probably spend more time informing shoppers in Connecticut, for example, about unfamiliar foods such as taquitos.
“Here in California, everybody knows what they are,” Greenfeld said of the popular Mexican food. “Back there, they are going to say, ‘A what?’ ”
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Trader Joe’s Growth
The popular chain’s revenue has surged as it has opened new stores. Annual sales, in millions of dollars:
1994: $604
Source: Trader Joe’s
