Trader Joe's Private Label World Revealed

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August 24, 2010

With sales of approximately $8 billion, Trader Joe’s, is roughly as large as Fortune 500 companies such as Whole Foods and bigger than Bed Bath & Beyond.

But unlike its larger Fortune 500 counterparts, Trade Joe’s typically carries 4,000 SKUs, 80 percent of which are store brands. “The result: Its stores sell an estimated $1,750 in merchandise per square foot, more than double Whole Foods'. The company has no debt and funds all growth from its own coffers,” according to the Fortune report.

Determined to discover the secrets behind the privately held grocer’s success, Fortune spent two months interviewing former executives, competitors, industry analysts, and suppliers for its detailed expose.

Trader Joe’s, which operates 344 limited assortment stores in 25 states, is at a crossroads in its development, the report noted, as it “expands into new markets and adds stores -- analysts say the grocer could easily triple its size in the coming years -- it must find a way to maintain its small-store vibe with customers.”

While Trader Joe’s, prefers to keep a lid on its store brand manufacturer relationships, Fortune revealed more than a few secrets including that its pita chips are made by Stacy's, a division of PepsiCo's Frito-Lay, and its yogurt is supplied by Danone's Stonyfield Farm.

“Why the lockdown? Former executives say that Trader Joe's wants neither its shoppers nor its competitors to know who's making its products. And many suppliers aren't that keen on consumers knowing that they produce a lower-cost version for Trader Joe's either,” according to the report.

And few outside the retail industry are aware that the Albrechts, the family that owns Aldi, also owns Trader Joe's through a family trust. Although Aldi also is a limited assortment retailer with a large proportion of private label, it skews more toward lower- to middle-income customers. The Albrecht family has also “generally stayed out of the business,” visiting Trader Joe’s once a year or so, according to Fortune.

And most retailers understand that what makes Trader Joe’s tick is the value it offers customers in exchange for selection. “With the greater turnover on a smaller number of items, Trader Joe's can buy large quantities and secure deep discounts,” according to the report. “And it makes the whole business –– from stocking shelves to checking out customers –– much simpler.”

The Fortune report also included a short video on the secret behind Trader Joe’s $2 wine.

For more on the mysteries behind Trader’s Joe’s purchasing, manufacturing and distribution, see Fortune’s article in its entirety.

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