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February 2006 Alumni to Know
He Brought Trader Joe’s to Main StreetJoseph Coulombe, MBA ’54 by Ken Hoover Joe Coulombe was 12 years out of Stanford Business School in 1966, happily running a chain of 18 Pronto Markets convenience stores in the Los Angeles area when a threat loomed on the horizon. The Dallas giant Southland Corp. was invading with its fast-growing 7-Eleven stores. Coulombe knew he had no chance against the well-heeled Texans. “The guy with the most money wins. He gets the best locations. It’s very simple,” Coulombe says now, but he knew it then. His best hope for survival was to come up with a new idea so the stores didn’t compete head on with 7-Eleven. He had to appeal to a particular demographic group that would seek out his stores, even if he couldn’t put them in the best locations. It took more than a year for the idea to crystallize. Part of his inspiration came from an article in Scientific American detailing a new generation of college-educated adults. Up to 60 percent of young people would be going to college, the article told him, up from just 2 percent in the early thirties, when he was born. Clearly, college was a factor that would transform society. Second, he read about the coming of the Boeing 747, a larger plane that would greatly reduce the cost of foreign travel. Coulombe began to see the demographic slice he wanted to attract: the growing group of people who were well educated and looking for something different—perhaps a bit exotic—but with keen eye for a bargain. As he tells it today, he saw his customers as teachers, musicians, journalists—the overeducated and underpaid. The final piece of the puzzle fell into place on a Caribbean vacation. Lounging on the beach, he saw what Trader Joe’s would look like: a South Seas trading post with fishing nets and oars adorning the walls. The rest is history. Joe Coulombe sees the grocery business through a changing kaleidoscope. Trader Joe’s has put once exotics such as whole soybeans, Indian pakoras, and imported cheese into millions of kitchens. In 2002, Supermarket News named him one of the 50 people who helped transform the grocery industry in the 20th century, and in 2000, Los Angeles magazine named him one of 10 almost famous Angelenos who helped shape the city’s culture. In 1967, Coulombe launched his first test of Trader Joe’s in Pasadena, a city he saw as the epitome of the overeducated, underpaid customer he sought, and the concept worked. Slowly, he began converting Prontos in demographically correct neighborhoods where his target customers would find them. Today, more than 200 Trader Joe’s in 19 states still sell to the overeducated and underpaid customers that Coulombe targeted in the late 1960s. While he retired from Trader Joe’s in 1988, he remains committed to the idea that a retailer must appeal to a particular demographic segment. The success of Wal-Mart and Bristol Farms and the stagnation of the big supermarket chains prove, he argues, that you can’t be all things to all people. Today at 75, Coulombe works out of his comfortable Pasadena home, only a few blocks from the first Trader Joe’s store. His own paintings, a pastime he took up for relaxation, adorn the walls. On a sunny day, he takes a visitor to his backyard patio, where his hillside vantage point provides a view of miles of Southern California trees. His dress is as casual as a Trader Joe’s employee. He takes off his shoes to enjoy the warm air. He serves on the boards of Cost Plus World Market and a Los Angeles newcomer, True Religion Apparel, which sells $300 jeans. He also lectures and writes on business and wines and—technologically savvy as he is—runs a website, winejoe.com, where he reports industry news and refutes numerical scoring systems. He serves on committees for the Huntington Library and the marketing committee for the Los Angeles Opera. At age 17 in 1947, Coulombe was one of 17 graduates of San Diego High School to enter Stanford as a freshman among older, war-hardened World War II veterans. He picked up leadership skills as president of a fraternity, and after a year off for Air Force duty, he graduated in 1952 and entered business school. In 1953 he married Alice Steere, a fellow grad student, whose father was William C. Steere, a Stanford botany professor and later dean of the Graduate Division and later still, president of the New York Botanical Garden. It may be a bit of an exaggeration, but Coulombe says a full professor in those days earned about as much as a journeyman grocer, so it was from the Steeres and the academic community that he learned about the class of consumers that would later provide his customer base. “Part of the idea of appealing to overeducated, underpaid people came from my mother-in-law, Dorothy Steere. I saw how she managed on that salary to produce excellent food. Bill Steere taught me to drink cheap wine. For our wedding reception, held at the Steeres’ house on Mayfield Road, we went to Ruby Hill Winery in Pleasanton and bought gallon jugs of chardonnay for a dollar. Steere also taught a course in economic botany, which involved visiting small wineries like Mayacamas, which was one of the first boutiques we sold at Trader Joe’s,” Coulombe recalls. A Stanford MBA lacked the cachet it has today, and one of the recessions that marked the Eisenhower years was in progress when Coulombe got his degree in 1954. The only job he could find was with the drugstore chain Owl-Rexall, which later asked him to start Pronto Markets as a test. He had six markets running when the firm ordered Coulombe to liquidate them. With financing from the Bank of America and relatives, plus selling his home and 49 percent of company stock to employees, Coulombe bought the markets and eventually stocked his Trader Joe’s with items customers couldn’t find elsewhere. Among the many facts that Coulombe absorbed in his varied reading was that the
better educated the person, the more he drank. So liquor would be an important
line at Trader Joe’s. He stocked more than 100 brands of scotch, 20 brands of
brandy, and 50 brands of whiskey, along with something new on the scene—the
California wines his father-in-law had introduced him to. But he had to learn
more. Testing panels were assembled to help him and eventually helped select
other products for the stores. But that doesn’t mean Trader Joe’s growth was straight up. His brush with 7-Eleven and the conversion of Pronto Markets to Trader Joe’s wasn’t the only time Coulombe had to do emergency surgery on the business plan. In the early 1970s the U.S. was hit with a major recession, and Southern California was especially hard hit because of a slowdown in the defense and aerospace industries. The overeducated and underpaid were feeling the squeeze. About this time, Coulombe latched onto two other trends among his favored demographic group—environmentalism and health consciousness.. He stocked granola, nuts, vitamins, dried fruits, and cheese, then considered a health food. Trader Joe’s became the nation’s largest retailer of brie. It published the Fearless Flyer, a newsletter mailed to customers that mixed Coulombe’s environmental message with Trader Joe’s bargains. In 1976, another crisis called for quick action. The California legislature repealed the long-standing law that fixed the price of milk, another important product at Trader Joe’s. When minimum prices were abolished at the start of 1977, margins tumbled from 22 percent to 2 percent in the first two weeks. Fortunately, Coulombe had been a prudent steward of Trader Joe’s. He had used profits to retire the last of the Bank of America debt in 1975, so the company was in good financial shape to ride out adversity. He decided that every product in the stores would have to make a profit. There would be no more loss leaders. The multitude of liquor brands went and Trader Joe’s survived, stronger than ever. In 1979, he sold Trader Joe’s to brothers Karl and Theo Albrecht, German businessmen who own the Aldi supermarket chain in Europe and the United States, although Coulombe continued to run Trader Joe’s for nearly another decade. The brothers visited Trader Joe’s and Coulombe visited them in Germany each year until his retirement in 1988. But Coulombe didn’t turn off the afterburners with his retirement. His business career merely took a new direction, as he applied his principle of appealing to the right demographic slice as the key to success. He was brought in to take charge of 11 different companies between 1989 and 1995, in most cases to revive or liquidate a sick patient. Some he won. Some he lost. He has served on the board of directors of several corporations, notably Denny’s and Bristol Farms until it was bought by Albertsons. In each endeavor, he brought his idea of appealing to a slice of the consuming public, not trying to be all things to all people. He’s especially tried to appeal to the group he seems to understand best, the overeducated and underpaid. That, he says today, is why Trader Joe’s has won such praise. “That’s why we always got such a good press,” he says. “The journalists loved us.” |
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Smoothing Paths in Two CountriesQuyen Vuong, MBA ’94 by K. Oanh Ha
In a squalid, teeming refugee camp, Quyen Vuong—on her own at 16—discovered what would become her life’s mission. It was 1981, six years after the end of the Vietnam War, which put a communist government in power. Vuong’s family had split up to find freedom and their way to America. She and a younger brother had endured a perilous boat escape, eluding pirates and rationing scarce food before reaching the Malaysian camp. “I made a promise to myself that I would come back to help other refugees,” says Vuong, recalling the four months she spent in the camp. Vuong, MBA ’94, has worked to keep her word by co-founding two nonprofit organizations. Pacific Links aims to leverage the efforts of nonprofits providing help in Vietnam, while the second organization, International Children Assistance Network (ICAN), works with youngsters in Vietnam and Vietnamese American youngsters in the United States. The efforts of Vuong and her sister, Diep Vuong, created a generational clash within the family that is only beginning to soften. The sisters believe the best way to change Vietnam and perhaps bring democracy is through engaging the government. To some who fled Vietnam, even nonprofit work that engages the current communist government is heresy. Their father, Vuong Quoc Qua, who was imprisoned under the communist regime, founded an organization in Orange County that seeks to overthrow that government. Vuong’s first nonprofit grew out of work she did while an undergraduate at Yale as a volunteer interpreter for the United Nations High Commissioner for Refugees. In addition to bureaucratic inefficiencies, she saw attitudes she disagreed with. “The people offering the aid acted like, ‘I’m doing you a favor,’ and expected people to gratefully take what was being offered. They weren’t treating them like these were their customers or clients,” she says. The result was Pacific Links, founded to combat the fact that many aid agencies were “working in their own silos,” Vuong says. “We can leverage the aid better and be more effective if we work together.” The number of Vietnamese Americans working through nonprofits to aid their homeland has grown, and in November, Pacific Links hosted a conference in Petaluma, Calif. where Hanoi officials acknowledged the contributions in sessions with nonprofit leaders. An alliance of 24 nonprofits was formed to continue work with the government on improving transparency and accountability. “It’s a step toward true reconciliation,” says sister Diep, who works for the East Meets West Foundation. Soon after founding Pacific Links, Quyen Vuong saw another pressing need among Vietnamese American youth closer to her home in Santa Clara, Calif. She worries that her 7-year-old son, Khoi, and his generation will face identity and cultural issues more difficult than those she and her siblings encountered. “They are being told to adopt the best of both cultures, but the best of both can be in conflict,” Vuong says. “Yet no one is there to help them sort through that. “The Vietnamese have been here for 30 years. Their needs have changed drastically. But the nonprofits haven’t geared their services to address those needs. They’re still focused on helping the adults with job training. No one’s paying attention to the kids.” ICAN offers educational and motivational programs aimed at Vietnamese American youth. The group hosts an annual event built around Vu Lan, a Vietnamese Buddhist holiday honoring parents. At the ICAN event families are encouraged to talk about the difficulties of assimilation. Other programs allow Vietnamese American youth to help other children in Vietnam. For many years, Vuong didn’t discuss politics or her work with her father. “We agreed to disagree.” But lately, reconciliation among the Vuongs has been building. Last year, Qua told his daughter that he could see how her philanthropy might also help him achieve his goals for Vietnam. In late October, Pacific Links hosted a dinner for Michael Marine, U.S. ambassador to Vietnam, to introduce him to people with concerns like those of the Vuongs’ father. When Quyen Vuong took to the podium to emcee the event, her father turned to others dining at his table and beamed, “That’s my daughter.” Before the evening’s end, he posed for photos with the ambassador. It was the first time father and daughters attended an event about Vietnam together. “He was very impressed,” says Quyen. “He’s much clearer now about the work Diep and I are doing. Before, he had no clue.”
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