Theo Albrecht, Trader Joe's, and Ruthless Focus
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The title of the Washington Post obituary sums it up: "Theo Albrecht, 88, dies; started Aldi food chain and expanded Trader Joe's." Here's the lead.
"Theo Albrecht, 88, a reclusive German billionaire who made his fortune building a discount-food business empire in Europe before buying and expanding the Trader Joe's grocery chain in the United States, died July 24 in his home town of Essen, Germany. No cause of death was reported. In the years after World War II, Mr. Albrecht and his older brother Karl took over their mother's corner store in Essen and turned it into Aldi, a multibillion-dollar chain of thousands of grocery stores whose success was firmly rooted in the Albrechts' penny-pinching ways."
It wasn't just "a" chain of discount grocery stores. ALDI (short for Albrecht Discount) was the chain that beat Wal-Mart at its own game. Wal-Mart threw up its hands and abandoned the German market four years ago.
There are really two ALDIs. In 1960, the brothers disagreed about whether they should sell cigarettes. Theo thought it was good business. Karl thought it would create a shoplifting problem.
The result was a friendly split into two companies. Theo got the ALDI Nord, covering Northern Germany and the rest of Europe. Karl took Southern Germany, Australia, the US, and the UK.
In Ruthless Focus, we recommend staying with a strategy as long as it works. That's what the Albrecht brothers have done. Their basic low price, cost-cutting strategy is the same in 2010 as when the brothers took over their Mutti's grocery 64 years ago.
But Theo Albrecht left us an even more impressive demonstration of the principle. It's part of the story of Trader Joe's.
The original "Trader Joe," Joe Coulombe, founded the company in 1958 in Southern California with the name Pronto Markets. The markets were basically convenience stores.
That made them vulnerable when the giant Southland Corporation began setting up its 7-11 stores nearby. His original strategy wouldn't work anymore, so Joe came up with something else.
He changed the strategy to targeting the educated consumer who wants a good buy. Probably that consumer was modeled on his father-in-law, a college botany professor who didn't make a lot of money.
He decided on low-cost gourmet foods presented in a fun atmosphere. The South Sea Island theme was carried through in the décor and the shirts worn by the staff. Oddball graphics and awful puns abounded.
He named the new stores "Trader Joe's." The first one opened in 1968 in Pasadena. In 1979, Theo Albrecht's ALDI bought the company.
At this point, ALDI could have acted like most big companies. They could have changed the way Trader Joe's did business. But they didn't
Trader Joe's strategy was working in 1979. So Albrecht stayed with it. It's still working today.
Here's to Theo Albrecht, who was not just a fabulously successful businessman, but one who realized that the best strategy is the one that works, not the one you came up with.
Boss's Bottom Line
When you've got a strategy that works, stay with it. That frees your people up to lavish innovation on the strategy. It helps you concentrate your resources and your efforts.
Posts about Ruthless Focus
Ruthless Focus: How to use key core strategies to grow your business
The Story of the Book
Annotated Table of Contents
Keep it Simple, Strategist
Strategy: Staying with What Works
Ruthless Focus on the Business Basics
Ruthless Focus: What about Toyota?
Ruthless Focus: Three Kinds of Crisis
The story of Yahoo's shifting strategy
Tom Stemberg, Staples, and the Two Strategy Questions
How Doing Acquisitions is like being a Fighter Pilot
Learning about Differentiation from Barbeque
Danger, Trader Joes!