Why Expansion Won't Hurt Trader Joe's Brand, But Secrecy Will
A recent Fortune magazine piece makes much of the idea that as alt-grocery chain Trader Joe's expands, it is at risk of losing customers' loyalty, as the chain will be increasingly less able to keep up the pretense that it's a homey, mom-and-pop chain. But that's not the biggest threat to this much-beloved brand's continued success -- it's the 344-store chain's deep secrecy about the origins of its "natural" and organic products.
As a devotee who's been hitting Trader Joe's since back when some of the stores were still called Pronto Market, let me say it's been evident for 20 years that Trader Joe's is not a small company, despite the Hawaiian-shirts-and-shorts employee attire and faux palm trees. It was always clearly a growing chain with a fun, offbeat company culture, that drove great bargains on gourmet food with its big-chain buying power. Readers of its recycled-paper newsletters were frequently regaled with stories of how many tons of cashews or Camembert the company had recently purchased to be able to offer shoppers an exceptional price. (The chain's actually as big as Whole Foods Market (WFMI), just a lot quieter about it.)
What is becoming a problem is the company's refusal to provide information on where its products come from and how they're made.
In an era of increasing scrutiny on local sourcing and having products be truly organic, Trader Joe's has kept many of its products' origins -- particularly its own house brands -- shrouded in mystery. As a result, the once all-fun brand has increasingly drawn the ire of environmental groups.
Greenpeace recently created a "Traitor Joe's" campaign to pressure the company into stocking only sustainably harvested seafood. The chain caved, saying it will go sustainable -- only by 2012. Currently, the Sustainable Food blog is running a petition campaign aimed at getting TJ's to disclose more information about its private-label foods, the ingredients in which currently can only be traced back to the grocery's store shelves. Some of its homegrown-seeming products have surprisingly big-corporate roots, as with the chain's pita chips, which are really made by a company in the portfolio of PepsiCo (PEP).
Awareness and concern about what's in our food and where ingredients originate is only growing. This is an issue that won't be going away, and Trader Joe's management would be smart to get on the right side of it as soon as possible, making disclosures and allowing third-party oversight of such claims as a recent one that the chain has eliminated all genetically modified ingredients. And how will that sustainable-seafood claim be verified? Cries of "greenwashing" will not help Trader Joe's keep its coveted crowd of upscale shoppers.
The atmosphere of secrecy likely originates all the way over in Germany. Trader Joe's is owned by the notoriously secretive German Albrecht family, who also own the Aldi grocery chain. The family is famous for never commenting on anything regarding their businesses.
But in the case of Trader Joe's food, the sooner an exception can be made, the better. If Trader Joe's wants to keep its credibility in the health-food niche, it'll have to meet the standards of rival Whole Foods, which offers consistent country-of-origin labeling and submits to independent, certified-organic monitoring checks.
They can fake the mom-and-pop feel, but Trader Joe's executives need to realize customers who pay more for organic expect concrete information about the quality and origins of what they're buying. Trader Joe's will need to provide it to keep their loyalty.
Photo via Flickr user kawanet