Media Review: Becoming Trader Joe
A read inspired by a virtual coffee chat
Earlier this spring, I had a virtual coffee chat with a partner at an early-stage deep tech fund. He was not looking to add more people to his team, but towards the end of the conversation he recommended a list of about 10 different books that covered the development of brand-name businesses and their leaders. Very few of them were in fields that screamed out to me as “deep tech”, and as I copied down the list I mentioned this to him.
His response was insightful.
He pointed out that as a VC, his job was to study businesses and their leaders, develop a view on whether or not they’ll become great, and use that opinion to make investment decisions. He thought that models can be effective training wheels to build intuition. However, an investor’s ultimate goal should be to develop a sufficiently broad understanding of business that a model isn’t strictly necessary to evaluate it. The only way to accomplish that is to learn a lot about lots of different types of firms. This needs to cut across geographies, sectors of the economy, history, and even types of institutions.
Becoming Trader Joe: How I did Business My Way and Still Beat the Big Guys was not one of the books on his list, but Trader Joe’s (TJs) happens to be a favorite grocery store of mine, and many of my friends. Furthermore, some friends in retail are seriously impressed by the institution, so its history seems as good a place as any to start.
Content
Trader Joe’s started as a non-VC-backed startup. Becoming Trader Joe is founder Joe Coulombe’s posthumous memoir of how he got the firm off the ground.
Trader Joe’s today is a leading retailer of groceries in the US, and the book presents a history of the firm, with all its quirks. This includes his approach to advertising, which has created a legendary following. It also goes on appropriate detours, like a discussion of the history of the alcohol industry during the 1900s.
The authors provide excellent macroeconomic context for the challenges and decisions that Joe made in growing the firm. As somebody who has spent time in Southern California, but doesn’t really know what the demographic changes in the area have been since 1960, I never felt like I was missing the underlying why? behind a pivot or strategic innovation.
One of the points the authors keep on coming back to is that TJs’s target demographic is the overeducated and underpaid. One of the core takeaways from the book is how Joe developed the firm’s marketing around reaching this group. He treated customers as intelligent in his marketing materials, looked up to them, and basically aimed to help them make better decisions. This informed the claims he made in the Fearless Flyer. One of the ways they show this even in the book itself is the variety of references and epigraphs, which come from sources across geographies, historical eras, and literary topics.
A second persistent topic (it’s so explicit I hesitate to call it a theme) is the role of regulation in retail. The authors discuss this in the context of milk, alcohol, cheese, and other products. One of the things I really appreciated about the text is the way the authors share what happened with the government, how it impacted the firm, and their opinion of it — and then they move on. This is neither an apolitical book, nor a series of rants.
There were a few chapters with exceptional lessons about what made Trader Joe’s unique. The topics they covered were:
Intensive Buying, which was his approach to procurement
Virtual Distribution, which explains how Joe got product to his stores
Private Label Products, which is particularly fascinating both because it is an area where TJs remains an industry leader today, and that its consumers encounter regularly
Double-Entry Retailing, which uses an introductory financial accounting concept to explain the firm as customers perceive it — as well as what impacts its ability to serve them (the following chapters address both the supply side and demand aide)
Organization
There are three distinct phases of the firm in the mind of the author, styled Good Time Charley, Whole Earth Harry, and Mac the Knife. The book is separated into four Parts that more-or-less correspond with the different iterations of the institution.
Section 1: How We Got There looks at the very early history of the firm. It has 10 chapters, and basically covers from the inception of the firm through the end of Whole Earth Harry.
Section 2: Mac the Knife tells the story of that particular iteration of TJs. It has 11 chapters. This portion of the text had particularly enlightening chapters about the philosophy of the firm, and what makes it unique.
Section 3: First I Sell, Then I Leave discusses the founder’s exit. It has 3 chapters. Overall, I thought this was the most consistently high-quality part of the book.
Addendum talks about the founder’s career after leaving TJs.
This is a logical top-level structure, but the authors were frustratingly inconsistent with how they wrote within it.
For example, they placed the conversation about milk squarely in Section 1, but the relationship between Trader Joe’s and wine permeated the whole text. Clearly wine played a bigger role in the firm’s history than milk, but it felt to me like the authors were attempting to split the difference on a topical vs chronological organization of the text. I found this approach confusing.
Furthermore, some chapters felt like they discussed business topics within a well-structured narrative, while others felt like more of an explanation of the topic without much narrative scaffolding. In particular, it didn’t always feel like there was a broader story around the Mac the Knife business concepts.
The authors have an additional unpleasant habit of bringing up topics only to say “I will not discuss them”. This reminds me of something I was taught to write in an ACT essay, to acknowledge the existence of a counterargument, and to not refute it. While I suppose it is worth acknowledging that the authors are aware of topics, I find it frustrating to see this approach to content in a book. Either tell me as a reader something about a topic, or do not mention it.
Finally, I found that the book frequently referred to other locations within the text (“see chapter n”). While I can see why a textbook would do this, I don’t think it’s a sign of a particularly well-structured narrative. A better-structured text would explain concepts the first time they appear; by comparison, this book is almost lazily organized.
I understand why these writing behaviors would appear in texts by founders who are not writers by trade or training. But this book is co-authored by Patty Civalleri, an award-winning writer. So my expectations for the book’s structure are somewhat higher.
How well does the book achieve its goals?
This is more a history of a firm than a memoir of a founder. It is very much a business history in that it is business-focused in its content and style. Certainly this is a book for the general public, but they say explicitly their audience is present and future entrepreneurs. Based on how they frame topics like regulation, Supply Side Retailing, and five year plans, the audience might be a bit more corporate — but it’s definitely written for the business person.
Joe has a lot to be proud of as a founder. During his twenty-six year tenure as CEO, sales grew at a CAGR of 19%, and the firm’s net worth grew at a CAGR of 26%! That is world-class sustained growth. His explanations of how he structured his firm to enable this, which appear particularly in Section 2, are worth reading. In this sense, the book is very successful.
What I’m left wanting more of is an understanding of Joe the person. There’s relatively little about his background as a person in the book, and he played such a big role in the firm that his personal story feels like a missing piece in the narrative.
I also found it surprising that such little space was dedicated to the cult following that TJs has built. I might have thought that for a CPG retailer, a deeper discussion of this is warranted. Ultimately though, this is the story of the business — not the customer (and never the consumer). The topic pops up, but in passing rather than as a core takeaway from the book.
The final thing this book says very little about is the current state of TJs. Joe’s involvement ended around 30 years ago, so this is a great Volume 1 of the firm’s history — but there’s a gaping hole between where the narrative ends and the present.
Final Thoughts
TJs wasn’t a VC-backable business when it was founded, and I doubt it’d fall into that category if it was started today. But that doesn’t mean it didn’t grow into a great firm! This book hammered home for me that not every awesome company can be (or should be) VC-backed.
This history of this grocery store, or as my girlfriend has recently started calling it, “an adult treat emporium”, shares both the specific strategies of this business as well as the founder’s view of its early history.
I cannot in good conscience recommend this as a work of literature, but it is a solid story of a remarkable consumer startup that explains why the founder thinks it was so successful.