By Nathaniel Meyersohn, CNN Business
(CNN) — It turns out Trader Joe was a real guy, and his shrewd instincts led him to create a countercultural grocery store empire.
Joe Coulombe, owner of a struggling convenience store in Los Angeles, decided in 1967 to open a chain of grocery stores to appeal to the small but growing number of well-educated and well-traveled consumers that traditional supermarkets were ignoring.
“I have an ideal audience in mind,” he told the Los Angeles Times in 1981. “He’s a person who got a Fulbright scholarship, went to Europe for a few years, and developed a taste for something other than ordinary Velveeta beer”. and Folgers coffee, he says.
Coulombe acknowledged that international travel was about to explode with the arrival of the new Boeing 747 on the market. For the name of its new boutique, Coulombe landed on Trader Joe’s to conjure up exotic images of the South Seas. The name was inspired by Trader Vic’s, a popular Tiki Bar restaurant established in California.
A marketing expert thought it was a terrible name – ‘Trader’ was ‘something associated with selling faulty horse flesh’, Coulombe said in his 2021 memoir, ‘Becoming Trader Joe’, a year after his death at age 89.
But it stuck, and the first Trader Joe’s opened in Pasadena, California in 1967. The location was ideal for its new target clientele, surrounded by college campuses, a hospital, and major engineering firms.
“He was a grocery outsider who could see things differently,” said Benjamin Lorr, author of “The Secret Life of Groceries: The Dark Miracle of the American Supermarket.” “He wanted to tap into this idea that food was an exploration, that food was a journey and an adventure.”
The first Trader Joe’s store had a nautical theme with marine artifacts including a ship’s bell, fishing net, and half a rowboat. The exit counter was an island with a roof. Employees wore Polynesian shirts and Bermuda shorts. The director was called captain and the assistant was second. And singsong Hawaiian music played on the speakers.
But the merchandise was nothing like what you would find at a Trader Joe’s today.
The original store offered a typical assortment of groceries, as well as discounted magazines, books, socks and stockings, records and photos. The big draw, however, was the liquor selection.
California had fair trade liquor laws, so manufacturers set minimum prices and it was illegal to go below that. Since Coulombe could not compete by offering low prices, he recognized that he had to offer a wide variety to stand out.
The first Trader Joe’s boasted the largest assortment of liquor in the world – 100 brands of scotch, 50 brands of bourbon and gin, and 14 types of tequila.
Coulombe eventually found a loophole in California’s fair trade laws that allowed his shop to import high-end French wine and sell it at lower prices than his competitors, helping him reach connoisseurs. of wine. (It wasn’t until years later that Trader Joe’s released its famous $1.99 Charles Shaw wine, known as “Two-Buck Chuck”.)
In the early 1970s, Coulombe took hold of the growing health food movement, believing it would attract the same kind of customers who also happened to be wine connoisseurs.
“His ideas for marketing groceries came from his marketing of wine,” said Benjamin Lorr.
Trader Joe’s first private label product was granola, then he started adding freshly squeezed orange juice, vitamins, nuts, dried foods and cheese. At one time, Trader Joe’s was the largest American importer of brie.
Coulombe immersed himself in health food culture in Berkeley and San Francisco.
“I hired a young hippie woman from the University of California, Santa Cruz to teach us the lingo,” he said.
Brandenburg brownies and Sir Issac Newtons
In 1977 Coulombe remade Trader Joe’s again – setting it on a path that would be more familiar to customers today.
In response to the end of California’s fair trade liquor laws and other price controls, Trader Joe’s needed new ways to increase profits and stay competitive. He eliminated most household staples and essential cleaning supplies and focused on food. He also reduced the number of items he carried and switched to selling largely private label items.
“As we evolved Trader Joe’s, its biggest departure from the norm wasn’t its size or decor,” Coulombe said. “It was our dedication to product knowledge, something that was completely alien to the retail culture, and the fact that we turned our backs on branded products.”
The company has even positioned its private labels and brand image to connect with well-educated shoppers — Brandenburg Brownies and Sir Issac Newtons, for example — Coulombe said.
Creating strong private label offerings to compete with national brands would be one of his legacies in the supermarket industry, Lorr said. “It changed the balance of the grocery industry. Suddenly grocers are empowered in ways they weren’t.”
But Coulombe resisted opening dozens of new stores.
The handful of stores Coulombe opened were in Southern California, which matched the demographic he was looking for – teachers, musicians, journalists and other professionals.
In 1979 Coulombe sold Trader Joe’s to the family of Theo Albrecht, then owner of the Aldi grocery chain in Europe. (Aldi in the US is separately owned by the family of Theo Albrecht’s brother, Karl.)
Aldi executives used to travel from Germany to visit Trader Joe’s about once a year, but they took a hands-off approach to overseeing the growing chain.
By the time Coulombe left his position as general manager in 1988, Trader Joe’s had 27 stores in California and an estimated revenue of $150 million.
It would be his successor as CEO, John Shields, a former Stanford fraternity brother, who drove Trader Joe’s out of California and turned it into a national chain. In 1996, Trader Joe’s opened its first two stores on the East Coast, both in suburban Boston.
In 2020, Trader Joe’s had more than 530 stores and an estimated revenue of $16.5 billion, according to the latest available data from Supermarket News.
“My successors at Trader Joe’s have taken a chain of 30 stores nationwide with remarkable adherence to the core concepts we started with,” Coulombe said in 2010.
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