Theo Albrecht, expanded Trader Joe's, dies

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Theo Albrecht, expanded Trader Joe's, dies
Emma Brown, Washington Post
Friday, July 30, 2010
Theo Albrecht started with a corner store.

Theo Albrecht, 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 Saturday in his hometown of Essen, Germany. No cause of death was reported. He was 88.

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.

Aldi - an abbreviation of Albrecht Discount - has become something of a legend among retailers for its devotion to cost-cutting, which has allowed it to sell groceries at bargain-basement prices.

The company grew by spending almost nothing on advertising and by simplifying its inventory, stocking only a fraction of the number of products featured in regular grocery stores. Customers pay extra for plastic bags in which they pack their own groceries, which keeps the number of staff down.

Thrifty brothers

Aldi's thrifty ways are a reflection of its founders' personalities. Theo Albrecht reportedly took notes during business meetings with 2-inch pencil nubs and lived in an unremarkable home in Essen. A former employee told an Irish newspaper in 2002 that the billionaire once criticized him for using paper that was "too thick. If you use thinner paper, we will save money."

Privately held by a web of family trusts, the Aldi empire is known for its secrecy and releases almost no information about its operations and sales. But its success is clear in the brothers' personal fortunes. In 2010, Forbes magazine estimated Theo Albrecht was worth $16.7 billion, making him No. 31 among the world's richest people. Karl Albrecht's fortune was reportedly $23.5 billion, No. 10.

Theodor Paul Albrecht was born March 28, 1922, in Essen. After his father, a miner, became ill, his mother opened a corner store, and Theo apprenticed there before joining the German army during World War II.

Karl fought on the Eastern Front, and Theo went to Africa with a supply unit. He was captured by U.S. troops before he was allowed to return home after the war.

The brothers took over their mother's store and quickly expanded it, opening tiny shops that sold butter, flour and other pantry staples. The goods were displayed not on shelves but in cardboard boxes stacked on wooden pallets.

Divided over tobacco

In the early 1960s, the brothers divided the business when they couldn't agree on whether to sell cigarettes. Theo Albrecht, the tobacco proponent, headed the stores in northern Germany (Aldi Nord). Karl Albrecht, who worried cigarettes would draw shoplifters, operated stores in the country's south (Aldi Sud).

The German stores were so dominant that not even discount giant Wal-Mart could compete with them; Wal-Mart withdrew from Germany in 2006. As the chain continued to grow, the brothers divvied up the globe, with Theo Albrecht taking the rights to Europe and his brother taking Australia, the United Kingdom and the United States.

Theo Albrecht found a way to do business in America, however, when in 1979 he bought Trader Joe's, a young California grocery chain featuring Hawaiian shirt-wearing employees, inexpensive gourmet foods and a cost-cutting ethic that mirrored Aldi's. Since then, Trader Joe's has developed a fanatical following among customers as it has expanded to more than 340 stores in 25 states and Washington.

Mr. Albrecht, once described by Forbes as "more reclusive than the Yeti," was obsessively secretive. He was married and had two children and reportedly was fond of golf, orchids and typewriters. He retired from his company's day-to-day operations in the early 1990s. Little else is known about his private life. He refused to be interviewed or seen publicly and went to great lengths to avoid being photographed.

Kidnapped in 1971

The insistence on seclusion became even more pronounced after 1971, when Mr. Albrecht was kidnapped on his way home from work. His assailants, a lawyer with gambling debts and a convicted burglar, disbelieving that the common-looking man dressed in an ill-fitting, off-the-rack suit could be their target, demanded to see his identification.

True to frugal form, Mr. Albrecht negotiated with his captors, driving the ransom down to 7 million Deutsche marks (about $2 million at the time). A bishop from Essen delivered the cash, and Mr. Albrecht was released after being held for 17 days in the lawyer's Duesseldorf office.

The kidnappers were caught and sentenced to eight years in prison. Mr. Albrecht won a tax dispute with the German government over whether the ransom was a business expense.

This article appeared on page C - 5 of the San Francisco Chronicle