NEWS & SOLUTIONS

SOUTH PASADENA, Calif. -- Looking for gluten-free cereal? What about cheese made with vegetable-based rennet? Or how about some fragrant white jasmine rice?While these items may not be on the top of everyone's shopping list, they're developing a following among a growing number of consumers who want to eat more naturally and exotically.Many of these shoppers are turning to Trader Joe Co. here, a retailer

SOUTH PASADENA, Calif. -- Looking for gluten-free cereal? What about cheese made with vegetable-based rennet? Or how about some fragrant white jasmine rice?

While these items may not be on the top of everyone's shopping list, they're developing a following among a growing number of consumers who want to eat more naturally and exotically.

Many of these shoppers are turning to Trader Joe Co. here, a retailer with about 80 units in California, Arizona, Nevada, Washington, Oregon and, recently, the Northeast. Just last year, Trader Joe's opened three stores in New York, one in Connecticut and three in Massachusetts. As for future growth, a fourth unit is scheduled to open in Needham Heights, Mass.; a second in Darien, Conn.; and several others in New York, according to a company flyer. Company officials declined to speak with SN.

As reported in SN, John Shields, chairman and chief executive officer of the chain, said the company hopes to have at least 50 stores in operation between Boston and Washington by the year 2000. He said the Northeast is a viable location because of its dense population base.

Trader Joe's is unique in that it offers a limited selection of low-priced specialty goods. "A Unique Grocery Store" is even emblazoned on the facade of its stores.

At a time when sales of private-label, specialty and natural products are on the uprise, Trader Joe's assortment is more appealing than ever. Stores carry only about 1,500 items at a time -- all of which have no artificial ingredients. About 80% of its product mix is private label. But branded products are also available. During a recent visit to its Oceanside, N.Y., store, SN saw Ocean Spray Juices, Dole Sorbet, Yukon Gold Potato Chips, Budge Gourmet frozen dinners, PowerBars, Ghirardelli chocolates, Snyder's of Hanover pretzels and Carr's water biscuits.

Shields has said Trader Joe's customers tend to be over 33 years old, with 80% having some college background and a higher-median-income level.

"Trader Joe's seems to be well received. It tends to have prices and products that appeal to the better-educated consumer," said Kim Galle, vice president of equity research for Adams, Harkness & Hill, Boston, which recently sponsored the first Healthy Living Conference, which is planned to be held an annual event.

Galle said that while Trader Joe's isn't a natural-food store, its wide selection of special-diet selections are helping to spur its growth.

"[Trader Joe's] has focused on the aging baby boomers. This is an important demographic because as people get older, their more concerned about their health. Stores like Trader Joe's are benefiting from this trend," Galle said.

Trader Joe's has worked to attract more customers through a strong education program. Each store has an information area where consumers can get printed material about the company's products and services. During SN's visit, materials describing its coffee and maple syrup were available. Other flyers listed products appropriate for special diets, such as gluten-free selections or cheese made from vegetable-based rennet.

Gluten is a grain-based protein that gives cohesiveness to dough. The protein causes allergic reactions and digestive problems in some people. Those on gluten-free diets do not consume wheat, oat, barley or rye derivatives. Trader Joe's has a list of dozens of gluten-free baking goods, beverages, candies, frozen entrees, grains and cereals, groceries and snacks.

Rennet, meanwhile, helps separate the curds and whey in milk to make cheese. Though most forms of rennet come from animals, there are also vegetable and microbial forms that are acceptable to lactovegetarians. A flyer at the information area lists all products that are made with different forms of rennet.

Based on SN's visit, information and education are a top priority to the chain. Dozens of ceiling danglers describe the company's products, how they're obtained and how to serve nd preserve them.

Despite its small size, about 6,000 square feet, the Oceanside unit caters to its customers in a number of ways, SN found during its visit. For instance, a sample table set up in the rear of the store held bowls filled with Trader Joe's tortilla chips, Hawaiian Justice potato chips and salsa. It also had two carafes of coffee, one of which was filled with Trader Joe's house blend, while the other contained decaffeinated Espresso DiRoma.

Also, as customers entered the store, they were greeted by a demonstration area, placed underneath a sign "A Taste of Trader Joe's." During SN's visit, Trader Joe's chicken potstickers were being offered.

Its Oceanside beverage department contained a sufficient selection of private-label and branded products. Its beer selections included Stinging Joe's Honey Wheat Bear, a blend it created with a regional Minnesota brewery, which sold at $4.99 for a six-pack; and Frugal Joe's Ordinary Bear, $3.99 a six-pack. Other beer selections include Peroni, Harp, Sierra Nevada, Pub Draught Guinness, Woodchuck Draft Cider, Amstel and Foster's Lager.

Across the aisle from the beer section were a variety of nonalcoholic beverages, including "smoothies"; Ocean Spray juices, 89 cents for a three-pack of 8.45-fluid-ounce boxes; Trader Joe's Raspberry Peach Blossom, 1.89 for a 32-ounce bottle; and New England Apple Juice, $1.59 for 32 ounces.

Bottled waters were also available, including Poland Spring, Crystal Geyser and Trader Joe's, which sold at 99 cents for 1 gallon.

Frozen food was given an entire aisle, consisting of four, 15-foot-long coffin cases on both sides. About 1.5 cases were devoted to frozen seafood; while another two held frozen desserts, toppings, ice cream and sorbet; and two carried frozen vegetable dinners, quiche, potstickers and chicken fajitas. Packaged meat, vegetables and appetizers were among the items that filled the rest of the space.

Several refrigerated units lined two perimeter walls and were filled with gourmet cheeses, milk, eggs, packaged salads, yogurt and beverages.

Shoppers with a sweet tooth are in for a treat at Trader Joe's. They can browse through tasty selections like Allen Wertz Simply Sugar-Free Candies, Trader Joe's milk chocolate peanut clusters, and After Eight thin mints.

Bulk nut and cereal section are also offered. Items in the bulk nut section sold at $1.59 to $3.99 a pound and included such selections as "Sierra Crunch Muesli" and "Raspberry and Cream Granola."

The company also caters to ethnic customers, offering such items as microwavable Indian Vegetarian Meals, $2.99 for 16 ounces, and microwavable Trader Joe's Roasted Vegetable Enchiladas, $2.29 for a package of two.

There's even something for the kids: Millina's natural organic kids' meal, which sold at 99 cents for a 15-ounce can.

Animal lovers aren't left out, either. The company's selection of health and beauty care products are all "cruelty-free." And its pet foods are natural as well. Trader Joe's kibble for dogs, for instance, is a chemical-free, nutritionally balanced product in which wheat is the main ingredient, according to company literature. Wheat bran and germ are added to keep dogs on a high-fiber diet. A 29-pound sack sells for $8.99.

The retailer's ample selection of low-priced upscale and natural/organic prices enables Trader Joe's to draw shoppers from all its competitors -- warehouses, natural-food stores, specialty retailers and the traditional supermarkets, said Gary Giblen, managing director at Smith Barney, New York.

"It's one of the few true format innovations that appears to be successful," Giblen said. Giblen said the company's large private-label selection demonstrates the potential of store brands.

"It shows that private label can be more than a cheap price-alternative; it can build store loyalty," he said.

When asked what the traditional supermarkets can learn from Trader Joe's, Giblen said they can tap into the natural/specialty/ethnic trends.

"Supermarkets can only do a certain amount of tailoring, such as natural food or Hispanic offshoots. But if a Trader Joe's is in their area, they need to have a natural/gourmet selection," he said.

Both the Oceanside and Commack, N.Y., stores have a nautical motif, complete with fish nets hanging from the ceiling and walls adorned with plastic lobsters, crabs, oars and life preservers. A sign behind the cash registers refer to the store manager as "captain" and assistant manager as "first mate." Name tags for store employees read "crew members."