Behind The Label: Trader Joe’s Secretive Sourcing Practices

The labels say natural and organic, but how can we know for sure?

It’s rare that a global supermarket chain retains the atmosphere of an intimate neighborhood grocery store. But in the five decades that it has been in operation, Trader Joe’s has managed to do just that, attracting a loyal following of conscious consumers with an extensive array of quality, feel-good, low-priced grocery items.

But how exactly is Trader Joe’s able to offer such seemingly gourmet foods at such a markdown? The company is notoriously opaque about its sourcing practices, claiming that it wants to protect itself and its suppliers from competitors. But without any information about Trader Joe’s practices, can we really trust the “healthy” and “organic” products we purchase from there?

In its early days, maybe. In 1958, Joe Coulombe opened the first incarnation of Trader Joe’s, then called Pronto Markets, in Pasadena, California, after returning from a trip to the Caribbean – hence the South Seas branding. Joe wanted to bring the exotic flavors from his travels to the corner supermarket, and his first stores were stocked with then-unknown ethnic food, California wines, and convenience items. Within ten years, TJ’s had expanded to 20 locations.

Coulombe’s venture attracted the attention of Theo Albrecht, the German entrepreneur who owns Aldi, one of the world’s largest discount supermarket chains. The Albrechts purchased Trader Joe’s in 1979, growing it from a small California business to a multi-million dollar chain, now with more than 365 locations.

The Good

Though Trader Joe’s doesn’t call itself a health food store, it stocks a wide array of natural and organic foods, from organic virgin coconut oil to gluten-free pancake mix. TJ’s states that all of its private-label products, which comprise an estimated 80 percent of inventory, contain non-GMO ingredients, no MSG, no added trans-fats, and no artificial flavors, colors, or preservatives. All Trader Joe’s-brand eggs come from cage-free hens, and ground beef is guaranteed to be “pink slime” free.

These conscience-friendly items are available at near-Walmart prices, a fact that both confounds and thrills many conscious consumers. One explanation lies in Trader Joe’s streamlined operations. According to Fortune magazine, Trader Joe’s purchases all of its products directly from manufacturers, which then ship straight to TJ’s distribution centers. Contracts are simple, which eliminates the need for corporate middlemen. Says Fortune:

Trader Joe’s is a supplier’s dream account: It pays on time and doesn’t mess with extra charges for advertising, couponing, or slotting fees that traditional supermarkets charge suppliers to get their products onto the shelves. ‘It’s all transparent – no BS,’ says a former executive.

Since Trader Joe’s purchases such large quantities, it is able to fetch lower wholesale prices for its products – a discount that is then passed on to the customer. Trader Joe’s also carries less product variety than competitors – 4,000 SKUs, as compared to 50,000 at most grocery stores – and products are retired if they’re not able to “earn their shelf space” in sales.

The Bad

Many of Trader Joe’s private label items are the same products you’ll find at other supermarkets, just with different packaging and prices. According to Fortune, TJ’s Pita Chips are manufactured by Stacy’s Pita Chip Company, which is managed by Frito-Lay and owned by PepsiCo. Trader Joe’s yogurt is produced by Stonyfield Organic (a Groupe Danone company), while its popular Indian Fare instant meals are made by Tasty Bite, a Mumbai-based manufacturer that also supplies Whole Foods.

Though these bits of information have leaked out to the public, Trader Joe’s is generally secretive about its product sourcing, claiming that it wants to protect both itself from the competition, and its suppliers from other supermarkets that may demand the same cut-rate pricing. While this rationale makes business sense, it means that in most cases, shoppers have no idea where their purchases come from, or whether they are truly safe, healthy, and ethically-produced.

A prime example of a Trader Joe’s product with suspicious origins is its famous Charles Shaw wine, also known as “Two Buck Chuck.” According to Business 2.0, the Charles Shaw line is produced by California-based Bronco Wine Company, the nation’s fourth-largest wine producer. Bronco also manufactures wine for budget labels Estrella, Forest Glen, ForestVille, Montpellier, and Silver Ridge, and its owner, Charles Franzia, descends from the family behind Franzia boxed wines.

While Charles Shaw bottles advertise a Napa Valley origin, most of Bronco’s grapes are actually grown in California’s San Joaquin Valley, which is known to produce lower quality wines. According to Inside Scoop SF, these grapes are then supplemented with additives like Mega Purple (a syrupy, concentrated, 68-percent-sugar concoction that is used to add body and flavor to “deficient” wines) and wood chips (which are thrown into wine barrels to mimic the taste of oak aging). The result, according to wine expert Jon Bonné, is “industrial wine that is the equivalent of a Big Mac or Velveeta.”

The San Joaquin Valley is also known for its unethical factory farming practices and large concentration of migrant workers. These issues came to a head in 2008, when an undocumented pregnant teenage worker died from heat stroke while picking grapes on a Bronco-owned farm, after working more than nine hours in hundred-degree temperatures. The death led to protests and petition efforts from the United Farmworkers National Union, calling for supervisor arrests and jail time. Bronco’s labor contractor, Merced Farm Labor, escaped relatively unscathed, but has been fined multiple times for violating workplace safety rules.

The Questionable

On its website, Trader Joe’s states that

Curiosity is a virtue. We value the inquisitive mind and enjoy the opportunity to satiate it (as well as the tummy that accompanies it).

However, TJ’s secretive practices and lack of transparency don’t lend to an easy inquisition. The company’s FAQ page lists cute responses to questions like “Why do you guys wear those Hawaiian shirts?” (“Because we’re traders on the culinary seas, searching the world over for cool items to bring home to our customers”) and “What do the bells mean at my local Trader Joe’s?” (“Those blustery PA systems just didn’t feel right to us, so we came up with a simple system to communicate – island style”).

But as for the tough questions on product origins, labor practices, supply chains, and just how it’s possible to manufacture a decent-tasting Cabernet Sauvignon for under $2, Trader Joe’s is notably silent. Perhaps it’s because of the competition, as they say. But perhaps it’s also because the stories behind TJ’s products resemble that behind Two Buck Chuck: questionable labor practices, sugary additives, and poor quality ingredients.

Trader Joe’s friendly atmosphere and yee-haw branding make us want to trust them. But until the company becomes more open about the way that it operates, it’s impossible to know for sure if Trader Joe’s is the more socially responsible supermarket choice.

SEE ALSO:

Behind the Label: Whole Foods’ 365 Everyday Value

Behind the Label: Investigating FreshDirect’s Local Commitment

Behind the Label: The Kashi Controversy

Behind the Label: McDonald’s See What We’re Made Of Campaign

Behind the Label: Chipotle, Food With Integrity

Check out all Behind the Label columns here.

Images: trekkyandy, Kables

Around the web

DISCUSSION

3 thoughts on “Behind The Label: Trader Joe’s Secretive Sourcing Practices

  1. I have some concerns about TJ’s. Is the food Fair Trade, sustainable, organic, & free-range? I may not have a lot of money, but I will vote with what I have.

    I believe the coconut oil isn’t Fair Trade. Buying maple syrup for cheap as a New Yorker is shameful. The free-range chicken doesn’t look anything like free-range chicken from small farms; it’s all pumped up. I don’t want to buy cage-free eggs when I can buy local free-range eggs.

  2. Nothing is sacred. It’s so disappointing to hear how corporate America likes to put the screws one of their own.

  3. You’re right that, in the complete absence of transparency from Trader Joe’s management, the ‘organic’ or GMO-free status of Trader Joe’s-branded products is open to doubt. The truth is that Trader Joe’s is NOT a vertically integrated company — none of their own-brand products are made under Trader Joe’s control, and the famously small head office staff could not possibly supervise or even monitor the hundreds of suppliers shipping products to Trader Joe’s from all over the world.

    And yet, the brand manages to sport an incredible halo effect among consumers with a bias towards ‘healthy’, ‘organic’, or GMO-free foods. Even this article blithely states that all Trader Joe’s eggs are cage free. They’re not. (And even the ones that might be technically ‘cage free’ are almost certainly not ‘free range’ which is what consumer mistakenly interpret ‘cage free’ to mean.

    How Trader Joe’s built that willing suspension of consumers’ skepticism is the subject of my book “Build a Brand Like Trader Joe’s”. You can get more info on this specific topic on my blog, http://www.TraderJoesSecrets.com

    In the short term, though, the truth is that Trader Joe’s merely asks suppliers — few of whom are even growers themselves — to attest to products organic or GMO-free status. The company has consistently refused to support the sort of testing protocols and supervision that would prove the merit of those claims.

    Does that make it worse than most rival grocers? No. But it will come under increasing scrutiny as more and more erstwhile fans become suspicious of Joe’s cult of secrecy.

 

Submit a comment:

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>