Innovations in U.S. Food Retailing

1. Innovations in U.S. Food Retailing Trader Joe’s • Founded by a Stanford MBA who owned a number of convenience stores. • Repositioned stores to appeal to worldly, health-conscious consumers. Focused on granola, nuts, dried fruits, vitamins. • Acquired by owners of Aldi in 1979 • Now has 253 stores • Sales estimated at $4.5 billion • Average sales per square foot estimated at $1,500 • Stores have 2,000 items. • Many suppliers are small; also sends scouts around the world to find innovative items • Only added scanners five years ago, considered impersonal by management

2. Innovations in U.S. Food Retailing Trader Joe’s(continued) • Cornerstones of strategy • Deliver value: “Two-buck Chuck” • Offer mostly private label; sell national brands at major discount • Have staff wear bright Hawaiian shirts • Merchandise a unique blend of products • “We taste everything we sell. Surprisingly few of our competitors do that.” • “Did you find everything you need?” If not, cashier will leave station to pick up item for you. • Unconditional “no questions asked” money-back guarantee. • No loss leaders • 10-15 new items per week; treasure hunt

3. Innovations in U.S. Food Retailing Whole Foods • Begun in late 1980 in an Austin Texas neighborhood with a hippie image. • Now has 183 stores in U.S., Canada, and the UK. Annual sales of $4.7 billion • Growth strategy • Purchasing smaller companies (such as 7 Wild & Fresh stores in UK) • Expanding existing stores • Adding new stores • 10 straight quarters of double-digit same store sales growth • Sales per square foot of $783 versus $570 for average supermarket

4. Innovations in U.S. Food Retailing Whole Foods (continued) • Cornerstones of strategy • Perishables account for 67 percent of total sales • Image of very high quality and high prices (Whole Paycheck) • High levels of product sampling (breads, cheese, fruits) • Organic foods, private label, salad bars, marinated and semi-prepared meats and foods • Deli and meat departments stand out • Environmentally and socially conscious • Unique target market • In-store areas to eat, some outside

5. Innovations in U.S. Food Retailing Whole Foods (continued) • Organizational Issues • Awards stock options to all employees, not just store managers • 90 percent of employees are full-time; non-union • John Mackey, CEO and founder, has salary capped at 14 times average company salary (not counting stock awards and options). Had to forego $46,000 in bonus money in 2005.

6. Innovations in U.S. Food Retailing • Greenmarket • Established in 1976 by the Council on the Environment • Aim was to help small family farmers sell fruits, vegetables, and other farm products • Sells organic fruits and vegetables, eggs, fish, jams and bread products • By law, everything sold at market must be grown or made there • Emphasis is on visual presentation, and quality instead of price

7. Innovations in U.S. Food Retailing • There are 16 greenmarkets in New York City; the Union Square market is the largest, by far. • It’s open year-round, 4 days per week (Mon, Wed, Fri and Sat) from 8AM to 6PM with an average attendance of 250,000 customers per week • Customers include noted chefs from Union Square area who can be seen buying produce for their restaurants, local “foodies,” and the general public