Why are Trader Joe's products -- like the frozen mac 'n' cheese and the peach salsa, mmmm -- so darn tasty? And how can the chain charge so little for such high quality items?
A Fortune magazine article goes inside the usually secretive world of the famously quirky grocery store chain and reveals a few tidbits we've always suspected but were probably better off not knowing ...
That the speciality grocery store chain is tight-lipped about its business practices is a fact that is as legendary as its vegan Pad Thai with tofu. And even as the chain continues to expand across the country, new info about the company hasn't come to light ... until now.
Fortune spent two months convincing former executives, competitors, industry analysts, and suppliers to spill the (chocolate-covered espresso) beans about the rumors and speculations surrounding the enigmatic company. Here's what they (anonymously) revealed:
- Despite its image as a small-scale retailer, big, well-known food companies make many of Trader Joe's products. The example in the article: Trader Joe's pita chips are made by Stacy's, which is a division of Frito-Lay. That's not to say the grocery chain doesn't support local and artisanal purveyors -- they absolutely do. But those food snobs who "only buy from small, local producers" might need to rethink their weekly trip to Trader Joe's.
- Many of the items at Trader Joe's are lower-cost in part because they are, quite simply, lower-quality; in fact, many of the products are inexpensive versions of items sold at high-end grocery stores. Example: The "Punjab Eggplant" that supplier Tasty Bite makes for Trader Joe's is almost $1 less than its "Punjab Eggplant" counterpart at Whole Foods.
- Another way to keep costs low? Trader Joe's only offers a small selection of products (compared to other grocery stores), which not only keeps stocking simple but allows them to "buy large quantities and secure deep discounts." Customers accept the quality over quantity business model because they trust that the few items will be good. It's pretty brilliant if you think about it.
- When it comes to expansion, Trader Joe's utilizes some borderline elitist practices in deciding where to build the next locale: They'll not only look at demographics of a potential market -- specifically, education level -- but also who's subscribing to high-end food and cooking magazines. It makes sense, though, because the chain caters primarily to foodies and epicures.
- Employees are worried that as the brand continues to expand, it will lose its cult following and "quirky cool." But is this the inevitable consequence of a small chain going nationwide?
Which is your favorite Trader Joe's product?
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