Something fishy at Trader Joe’s?
Touting itself as “your neighborhood grocery store,” Trader Joe’s is known for its Hawaiian shirts, good deals and quirky mix of products—many of which come with environmental claims.
It’s generally seen as the lower-cost version of Whole Foods [Nasdaq: WFMI], a place where people who want to support organic food producers and manufacturers of “natural” products go when they want to save a few bucks. It’s known for friendly, laid-back customer service and for treating its employees well. For these and other reasons, it’s ranked high on customers’ lists as the place to grocery shop, winning the No. 3 spot in a 2007 ImagePower Green Brands Survey, just below Whole Foods and Wild Oats (which has since been acquired by Whole Foods).
But to the dismay of most Trader Joe’s fans, the company is actually owned by a global corporation run by one of the richest tycoons in the world. Those in the green business world find it even more surprising that while the company’s stores attract plenty of eco-minded consumers, it spends no money marketing the stores as “green.”
So how did the Monrovia, Calif.–based company that started in 1969 as a chain of Los Angeles–based convenience stores rise to the top of environmentally conscious customers’ lists? It keeps its stores and inventory small, targets customers who prefer natural and gourmet food stores to mainstream grocery stores and does not reveal the sources of its bargain-priced products.
Joe's biggest trade
If one looked beyond Trader Joe’s tiki theme and chalk-scribed signs, they would find many similarities between Trader Joe’s and its parent company, Aldi, a large German discount brand with thousands of stores in 17 countries (including more than 1,000 stores in 29 states). Ten years after creating Trader Joe’s in 1969, founder Joe Coulombe sold his company to Theo Albrecht, a German entrepreneur, who in 2009 was ranked by Forbes magazine as the 9th richest person in the world. (At the time, Albrecht owned Aldi with his brother Karl. Today, Theo owns Trader Joe’s and his brother Karl owns Aldi.)
Aldi is largely credited with giving Germany the lowest grocery prices in the European Union. In fact, its prices are so low that Wal-Mart [NYSE: WMT] couldn’t compete and left the country in 2006. Aldi made its fortune selling a large assortment of private label products that it could get made on the cheap and thus sell for far lower prices than name-brand products—not unlike 85 percent of the non-alcoholic products in Trader Joe’s, which are also private label.
Products carrying the Trader Joe’s private label have helped differentiate Trader Joe’s from other grocers in its price bracket. But Trader Joe’s leaders are notoriously tight-lipped about the sources of those products, as are the stores’ suppliers. Sustainable Industries was unsuccessful at getting an interview with Albrecht or other members of the management team for this article—which apparently is not uncommon.