Ben Hadley

This is the story of a man who built a grocery store for the overeducated and underpaid, a man who saw the future of American culture from a beach chair in St. Barts, cocktail in hand. It's the story of how a struggling chain of convenience stores, doomed to be crushed by 7-Eleven, transformed into a beloved national institution by selling wine to hippies, embracing a tiki theme, and turning regulatory complexity into a competitive advantage. This is the story of Trader Joe's, and the accidental grocer who created it, Joe Coulombe. Joe Coulombe was on vacation, and he was screwed. It was the early 1960s. He was in a beach house in St. Barts, looking out over the ocean, a tiki-inspired cocktail in hand. He was the 27-year-old president of a fledgling chain of six convenience stores in the Los Angeles area called Pronto Markets. By all accounts, he should have been celebrating. He was a young, successful executive, a recent Stanford MBA graduate who had been hand-picked to bring a hot new retail concept to Southern California. But as the Caribbean waves lapped the shore, all Coulombe could see was the tidal wave of competition heading his way. The plan, as he would later joke, was cocktails. The real plan was tiki. Just a few years earlier, Coulombe was a fresh-faced Stanford business school graduate, an unusual pedigree in an era before MBAs became a corporate prerequisite. The only job he could get was at the struggling Owl Drug Company, a subsidiary of the larger Rexall conglomerate. His boss, an executive named Bud Held, tasked him with a simple mission: figure out how to turn the company around. Coulombe's research led him to Texas, where a company called the Southland Corporation was having explosive success with a new concept called the "convenience store." They had recently rebranded their stores to reflect their operating hours: 7-Eleven. Coulombe saw the future. He returned to California, convinced that cloning the 7-Eleven model was the answer. After a brief, 18-month detour working in the burgeoning semiconductor division at Hughes Aircraft—a tantalizing glimpse of an alternate history where "Trader Joe" might have become a Silicon Valley legend—he was lured back to Rexall. Bud Held had finally persuaded the corporate bureaucracy to green-light the convenience store project. Coulombe was made president of the newly christened Pronto Markets. The first six stores were a hit. But as Coulombe sat on that beach in St. Barts, he understood a brutal truth. The real 7-Eleven, the well-capitalized, rapidly expanding juggernaut from Texas, was coming to California. His little six-store chain was a pilot fish about to be swallowed by a shark. He couldn't compete with them on their own terms. He had to do something different, something they couldn't or wouldn't do. He needed a moat. He found it in hard liquor. At the time, California operated under a set of Depression-era "fair trade" laws. These weren't suggestions; they were mandates. Manufacturers set minimum prices for their goods, and it was illegal for retailers to sell below them. This system, designed to protect small businesses, created a predictable, regulated profit margin for anyone who could navigate the complex web of licensing. For Coulombe, it was a godsend. Getting liquor licenses was difficult and expensive, a barrier that a large, out-of-state corporation like 7-Eleven's parent, Southland, would be slow to overcome. For a nimble local operator like Coulombe, it was a golden opportunity. He transformed his Pronto Markets. They were no longer just convenience stores; they were becoming liquor stores. But he didn't stop there. He saw another, even more promising opportunity in wine. In the 1960s, wine in America was either cheap jug wine or expensive, inaccessible European imports. Coulombe saw a new customer emerging: the recent college graduate, the young professional, the person who was, as he famously put it, "overeducated and underpaid." They had sophisticated tastes, but not a lot of money. They had traveled, maybe on a post-graduation trip to Europe, and they wanted something better than what their parents drank. Coulombe became a master of finding value. He scoured the vineyards of California, discovering a glut of high-quality grapes. He found a Napa vintner who could bottle a surprisingly good wine for him, which he sold for a dollar a bottle. It was a smash hit. He then turned to Europe, finding a Burgundian family who could produce a Beaujolais for him. This wine, which would become famous as "Two-Buck Chuck" (though that name came later), was another phenomenon. Trader Joe's became the destination for this new class of wine drinker. But a store needs an identity, a soul. Coulombe found his in the most unlikely of places: the romanticized, kitschy world of tiki culture. He had been reading a book called White Shadows in the South Seas and was inspired by the Jungle Cruise ride at the recently opened Disneyland. The era was awash in a fascination with the South Pacific, from the James Bond films to the popular Trader Vic's and Don the Beachcomber tiki-themed restaurants. It all clicked. His stores would be outposts of adventure, run by "traders on the high seas." In August 1967, he opened the first official Trader Joe's in Pasadena, California. The location was deliberate, chosen for its proximity to Caltech and its population of professors and students. The tiki theme was everywhere. Employees were "crew members," the manager was the "captain," and everyone wore Hawaiian shirts. It was a world away from the sterile efficiency of a 7-Eleven. As the 1960s gave way to the 1970s, Coulombe's uncanny ability to read the cultural zeitgeist struck again. The hippie counter-culture movement was splintering, and one of its offshoots was a burgeoning interest in health food and natural living. Coulombe, in what he would later call his "Whole Earth Harry" era, leaned in. He began stocking granola, nuts, dried fruits, and vitamins. This wasn't just a product line extension; it was a strategic masterstroke. It introduced the concept of private-label products to the company. Instead of just reselling what others made, Trader Joe's began sourcing its own food. This allowed them to control quality, cut out middlemen, and offer unique products at unbeatable prices. It would become the cornerstone of the entire business. This pivot proved crucial. In 1977, California repealed the fair trade laws. The protective moat that had allowed Trader Joe's to thrive suddenly evaporated. Discount liquor chains flooded the market, and profit margins on wine and spirits were crushed. But by then, Trader Joe's was no longer just a liquor store. It was a health food store, a specialty grocer, and a cultural phenomenon. The private-label strategy had given it a new, more durable competitive advantage. The company's success did not go unnoticed. In Germany, Theo Albrecht, the secretive billionaire co-founder of the Aldi discount supermarket empire, was looking for a way to enter the U.S. market. His brother's half of the Aldi empire was already there, and Theo was envious. His bankers found Trader Joe's, a quirky 20-store chain in California that was doing something special. Theo was captivated. He spent years trying to convince Coulombe to sell. Coulombe refused. He had no interest in selling, and certainly not to a discount grocer like Aldi. But then, his own plans to turn the company over to his employees through an Employee Stock Ownership Plan (ESOP) fell apart. The repeal of the fair trade laws had thrown the industry into such disarray that no one could agree on a valuation for the company. Frustrated, and facing a personal marginal tax rate of 73%, Coulombe re-engaged with Theo. He laid out his terms in a one-page contract he drafted himself. Trader Joe's would have complete management autonomy and would not become part of Aldi. The strategic plan would be private-label, not deep discount. Coulombe could stay on as CEO for as long as he wished. The price would be three times what Theo had offered a few years prior. And there would be no diligence, no army of lawyers, no definitive merger agreement. One page. Sign it or no deal. Theo Albrecht, a man who understood the value of trust and a good business, said yes. In 1979, he bought Trader Joe's. He and his foundations would never invest another dollar into the company; they didn't have to. It was, and remains, a cash-flow machine. Coulombe stayed on as CEO for another decade, cementing the culture and strategy before handing the reins over to a new generation of leaders. Under CEO Dan Bane, who took over in the late 90s, the company refined its focus. Bane recognized that the store's unique, sometimes chaotic experience—the small stores, the crowded aisles, the treasure-hunt atmosphere—was not ideal for families doing their weekly shop. Instead, it was perfect for young professionals and retirees, people with time to browse and a desire for social interaction. Trader Joe's doubled down on this demographic. They hired for extraversion, seeking out former theater kids who would create a friendly, engaging atmosphere. They packaged their famous frozen meals in individual serving sizes, the opposite of the "family size" ethos of every other supermarket. They turned the shopping trip from a chore into an adventure. The results are staggering. Today, Trader Joe's generates over $2,000 in sales per square foot, more than double its nearest competitor, Whole Foods, and four times the industry average. It has achieved this with a radically simple model: a small selection of about 4,000 items (compared to 50,000 at a typical supermarket), almost all of which are private-label. By cutting out brands, marketing costs, and the pernicious 'slotting fees' that CPG companies pay to get on supermarket shelves, Trader Joe's delivers exceptional value to customers while maintaining healthy profits. It is a testament to a founder who, when faced with certain doom, didn't try to compete—he chose to be different. He built a store that was a reflection of his own curiosity, his intellectual rigor, and his uncanny ability to see what was coming next. He was the accidental grocer who created not just a business, but a beloved cultural icon, one bottle of Two-Buck Chuck at a time.