John Moore Say Hello!
Twitter Linkedin Facebook

Trader Joe’s … the Forgotten Supermarket Giant


There’s been much hullabaloo surrounding the FTC blocking the proposed merger between Whole Foods and Wild Oats. The FTC believes this merger will concentrate too much of the country’s natural/organic supermarkets in the hands of one retailer. And because of this, consumer choice will be reduced, leading to higher consumers prices for natural/organic foods.

In the lawsuit filed last week, the FTC contends, “Consumers have benefited directly from the price and quality competition between Whole Foods and Wild Oats. If this acquisition occurs, those [price/quality competitive benefits] will be lost.”

Many Wall Street analysts, lawyer-types, and highly-informed shoppers have chided the FTC for such irrational antitrust action. They cite the FTC is too narrowly defining this marketplace as only being defined by natural/organic grocers and not the larger supermarket industry. Plus, it has been noted that Wal-Mart, Kroger, and the other supermarket leaders are significantly increasing their natural/organic offerings to take advantage of this long-emerging trend.

As a former marketer with Whole Foods Market, I’ve been thinking a lot about this situation. What surprises me most is how much credit the FTC is giving Wild Oats. The FTC believes Wild Oats is Whole Foods biggest competitor and that there is a vibrant competitive battle between these two grocers. The FTC also seems to think Whole Foods strategizes to counter how Wild Oats prices its merchandise.

Not true.

Whole Foods long ago stopped considering Wild Oats as a competitor mainly because of the company’s continued weak financials. As for strategizing over how to handle Wild Oats pricing scheme, that’s not been a focal point for Whole Foods.

What has been and continues to be a major focal point for Whole Foods, as it relates to competition and pricing, is TRADER JOE’S. Trader Joe’s is the grocer that keeps Whole Foods in-check with prices, not Wild Oats.

Trader Joe’s, a privately-owned specialty grocer with over 280 locations in 32 states, has carved an interesting niche within the natural/organics retail industry that the FTC has failed to notice. They are nearly three-times as large as Wild Oats in store count and almost five-time larger in overall sales.

Since the company is private, financial numbers are hard to come by; however, the Supermarket News trade magazine estimates 2006 sales at Trader Joe’s were $5.0 billion. In his book, “The Trader Joe’s Adventure,” author and long-time retail industry journalist Len Lewis, estimates sales per square foot at Trader Joe’s approach $1,300. (For reference points, Whole Foods operates about 195 locations and 2006 sales were $5.6B. Sales per square foot at Whole Foods are around $900. Sales at Wild Oats in 2006 were $1.2B and the company generates about $450 in sales per sq. ft.)

Trader Joe’s targets price-conscious, healthy and gourmet-inclined shoppers who are willing to forsake consistency (in branded product assortment) for the delight of a bargain. (Think Dollar General’s discount ethos meets Costco’s selectivity meets Dean & Deluca’s foodiness and you get Trader Joe’s.)

The typical Trader Joe’s location stocks about 2,500 skus (stock keeping units) and store size is no more than 12,000 square feet. The really interesting aspect to Trader Joe’s is that 85%+ of their merchandise assortment is comprised of Trader Joe’s private-label goods. (The typical supermarket merchandise assortment will consist of about 20% private-label products with the rest being brand name products.)

Also interesting to note is Trader Joe’s sells a preponderance of natural and organic offerings which are free of artificial colors, flavors, and preservatives. Trader Joe’s clearly competes in the natural and organic grocery marketplace.

In the cities where Trader Joe’s and Whole Foods Market compete, you will see similar pricing in the brand name products that each sells. For example, Tom’s of Maine toothpaste sold at both Trader Joe’s and Whole Foods will be comparatively priced. Same goes for Kashi products, Nature’s Path products, and many other widely available natural/organic brands.

Not only will you see similar pricing in the brand name products each grocer sells, the similarity in private label offerings is also noteworthy. Trader Joe’s does brisk business with its wide array of ready-to-eat frozen foods. Each frozen meal offering from Trader Joe’s is branded in a light-hearted manner with Mexican meals under the “Trader Jose” name and Chinese dishes under the “Trader Ming” name.

Whole Foods noticed the success they were having with private-label frozen goods and strategized on how best to counter. What Whole Foods did was develop a wide array of private labels products with various names like Whole Catch (frozen seafood), Whole Treat (frozen deserts), and Whole Kitchen (frozen entrées).

I bring all this to our attention because in the FTC’s narrowly defined marketplace for natural/organic grocers, they seem to have forgotten about Trader Joe’s and its competitive positioning against Whole Foods. Remember, Trader Joe’s is growing rapidly. They currently have 280+ locations with sales estimated at $5.0B. Because they open 12,000 sq. ft. stores, Trader Joe’s can find suitable real estate locations easier and open up stores faster than can Whole Foods.

The FTC needs to recognize Trader Joe’s is a considerable threat to Whole Foods Market.

Trader Joe’s, along with Wal-Mart, Kroger, Wegman’s, Costco, and others will help keep prices down and competition high for shoppers seeking higher-quality natural/organic foods if the Whole Foods/Wild Oats merger is approved. I’m sure the lawyers prepping Whole Foods Market’s defense will make sure to point out the robust competition that Trader Joe’s and others bring to the supermarket space.

Sources used for this post include:
Wild Oats wikipedia page; Trader Joe’s wikipedia page; Trader Joe’s squidoo lens; THE TRADER JOE’S ADVENTURE (Len Lewis)


  • I prefer the experience of shopping at Trader Joe’s vs. Whole Foods for many reasons.1. Store layout — TJ is much easier to navigate with fewer choices; WF as narrower isles and more choices2. Staff friendliness — I always have a chat or a nice laugh at a TJ. And the managers walk the floor to assist customers; WF tends to be more boutique-like where the environment makes you a bit timid in asking for help. You almost feel you are imposing.3. Other shoppers — I have often struck conversations with other shoppers at TJ. The cheese counter seems to be a perfect spot for learning interesting facts. And you will definitely attract at least one inquiry when you reach for a dozen TJ bars of 73% dark chocolate. At WF I often get the idea that people go there to be seen more than to buy good food.

  • I’ve been a big fan of TJ’s for years — dating back to my days living in LA, when the Fearless Flyer used to talk about their intrepid buyers finding Russian tuna trawlers on the high seas and buying up 900 lbs of Mako shark steaks (for basically nothing) and passing along the savings… that, and $2 bottles of Spanish sparkling wine, etc. It was the Banana Republic of food stores, back when BR was selling Israeli paratrooper pants.The experience — the selection, the envrionment, the sense of discovery, and the whole insider nature of shopping there — was, and to a degree, still is the reason I shop there today.

  • the food guy says:

    The problem is whole foods is not really aorganic food store…they copped out years ago when they were just a small shop on Richmond in Houston…when I want true organic. I go to a store that supports local farmers, or as close as can be.Whole foods is a hoax..oh yea they sell lots of vitamins and natural kitty food, and even boar hair brushes…My suggestion?Visit San Diego and drop by a Jimbos…their the real deal…but I will go to Trader Joes to get some frozen berries

  • I’m looking forward to the arrival of Tesco.That will be fun

  • thom singer says:

    Trader Joe’s has a cult like following. I grew up in California, and even when the chain was just a few stores….people were adicted to the place. The price on good wine brings in a lot of people, too.I can’t figure why the FTC denied the merger, as it is clear that organics are all over the place. I do not shop at Whole Foods for organics, I go there for the variety of specialty items…many of which are not healthy (the chocolate bar has great candy in my local store…not exactly health food nor organic…but dang, it is good!)

  • Valeria … I understand your thinking. The stores WFM builds these days have an uppity feeling to them which definitely appeal to the aspirational shopper. For many, the bigness and opulence of WFM locations give it a “look but don’t touch” feeling. With its “tiki-chic” unpretentiousness, TJs exudes a very welcoming vibe.Stephen … the sense of discovery is huge for TJs. They’ve managed to give off a “buy-it-now-closeout sale” buying impetus without sacrificing quality or expertise. Very few retailers manage to sell cheap without being cheap.Food Guy … you are hardcore. Not many people are so determined to make all their food choices local and organic. Keep in mind, WFM has helped pave the way for Organics to gain momentum. Without WFM’s unfailing support, the growth of Organics in the U.S. would be less than what it is today.Mario … Tesco will bring something new to retail. I’ve only read about Tesco and haven’t truly experienced shopping there so I can’t add anything here.Thom … it is indeed that cult-like feeling which fuels TJs. I was surprised to learn they are almost as big as WFM in sales and considerably bigger in store count. I knew TJs was doing very well, but it didn’t connect with me how well TJs is doing until I wrote this post.

  • Trader Monkey in Corporate says:

    You forgot to mention that Trader Joe’s is a wholly-German owned company, part of the Aldi group of stores. Aldi makes Wal-Mart look like Starbucks. Aldi pounds down the competition by squeezing their suppliers for the cheapest price possible. This happens in the US also. Just look at the recent recall of “Trader Butcher” Trader Joe’s meat, lumped into the same pile of beef purchased by Albertson’s and Wal-Mart. Trader Joe’s SEEMS all-natural, but they actually carry a very limited amount of Organic. They are famous for forcing vendors to produce shoddy private-label items at a low price, which has been the success of Aldi in Europe. The cute, hippie California Trader Joe’s only exists in the newletter. It is the store of the 4th Reich.

  • @Trader Monkey – Whoah buddy. Taking it a bit harsh there aren’t you? Aldi is huge in Germany sure (~40% of all grocery sales) and they are very tight, but their business model in Europe is hardly alone. A couple of the biggest others include Edeka and Lidl. But as a trend, discount grocers are oftentimes a banner in larger retailers’ brand portfolios including that of Carrefour and Tesco.If you’d like to learn more about Western European retailers shoot me an email and I’ll send an extensive report I did in 2005, outlining the major players and their holdings at the time.

  • John, thanks for putting Trader Joe’s into the bigger grocery store perspective. They operate in such a focused manner that many don’t realize that they are part of the redefinition of the grocery store experience.

  • As I write this I am eating TJ’s delicious and healthy chicken salsa verde. I live equidistant between Whole Foods and Trader Joes and would choose Trader Joes in a heartbeat. Not only is their food less expensive – to me it tastes better. Better quality and less money – now that’s value!

  • Sergio says:

    Whole foods managers are mean to people!!! They just opened a new store in Pasadena, CA and I have seen how much they humiliate their employees (make them wipe the floors with their hands and a rag). I like the look of the store, but their prices are way, way too high for everything they sell. Trader Joe’s has better prices in comparison. Too bad! I thought WFM was going to be a good experience and turned out to be such a fiasco. I hate Whole Foods! I hate it! I hate it!!!!

  • J. Degener says:

    I shop at TJ and WF. It all depends on what’s on the shopping list. Mostly organic produce,euro chocolate,and euro cheeses. If you notice, many of store brand products are from the same producers(TJ organic milk, WF organic milk both from plant #09-183 which is a Name brand organic milk plant).The milks vary in price about 20-30 cents. WF is now cheaper, but last month it was TJ. I find WF to be better with thier lableing. I want to know where my food comes from. A lot of TJ organic comes from China (frozen Broccoli,canned tomatos,beans,etc.) China is not the place to get organics and Aldi is low grade on the shopping store food chain. I stick to US,Canada,Europe,NZ. You Can’t beat TJs frozen and canned salmon (Canada) prices! Both Stores are great, But need to lable food origin better!

  • Matt says:

    Great writeup. I was in a similar position in a completely unrelated sector and industry, and it was always remarkable who people considered to be our competition.

  • TK says:

    Your Type of store would do fantastic here in Florida.Clearwater beach does not have anything like your store.Please look into it. TK