I think I had heard somewhere that when a food manufacturer wants to distribute at TJ’s, they get only a small amount of shelf space to begin with, and if the product sells well, they can only get more shelf space / stay in distribution if they agree to sell the product under the TJ’s private label. To me I thought this was a fascinating aspect of TJ’s purchasing strategy, especially as they’ve achieved large enough scale that they can enter this virtuous cycle of attracting manufacturers who are looking for the volume, and then pushing out a lower-cost product for the consumer.
I also am curious about TJ’s internal product innovation model. One of the things I’ve noticed, as a loyal fan, is that over time their offerings of unique, incredibly tasty products has really exploded, from very addictive snacks (that I sometimes prefer to those produced by the large national brands) to baking mixes and frozen food offerings. I’m very curious how much of this unique product development process occurs in-house (which would be pretty cost-intensive) vs. through its food manufacturing partners, and if the latter, how they maintain the exclusivity of the new product given that it would be competing indirectly with the manufacturer’s branded products being sold in other retail channels.
It seems like a big part of how Heady Topper is maintaining their quality is through distribution (on top of a high quality brewing process). I wonder if this means that they are committed to only being regional players, wherever they set up shop (as their current strategy would imply), or if they would ever consider investing in a distribution system that allows them to maintain this level of quality while achieving broader reach?
If they go to the regional route, I think something else they would have to consider is how being in different geographical areas might impact the taste of their product. For example, I know that New Belgium Brewery in Colorado (whose most well-known beer is Fat Tire) had to search far and wide in the U.S. before they found a state where the water did not adversely affect the taste of their beer. Given how devoted Heady Topper is to consistency and quality, I wonder if they are similarly geographically limited, or alternatively, if they would think about producing different lines of product from its different locations. Overall, I think this is an interesting case of how the business and operating models are aligned, but the operating model produces substantial constraints on the business model.