"When your supplier hates your guts, it's kind of hard to do business."
Photo: Konstantin Sergeyev
Canada is a vast, wondrous country with many interesting and beautiful things. A Trader Joe’s store is not one of those things. When Michael Hallatt moved from California to Vancouver, only to realize that there was a shop just close enough in Bellingham, Washington, where Canadians regularly stocked up on Speculoos cookie butter, Inner Peas, cocoa-almond spread, and Cat Cookies for People, Hallatt figured he could save people the hassle of crossing the border and dealing with customs agents — while adding a few dollars to the prices of products — and make a small profit.
So about two years ago, he opened a retail location that soon became known as “Pirate Joe’s,” an “unaffiliated, unauthorized re-seller of Trader Joe’s products.” If it sounds shady, know that Hallatt has played by the rules, legally speaking, and won two lawsuits against the corporation. Currently, Hallatt is in lawsuit round three (Trader Joe’s has appealed to the 9th Circuit), and his store has now come to represent some much larger ideas about small business, market forces, and demand, even if Hallatt’s main goal is simply to convince the chain to expand into Canada.
Do you remember your first Trader Joe’s experience?
I was living in Emeryville, but I was a Whole Foods person. You go in there, and there’s somebody elegantly serving you samples of organic blood oranges and you’re like, “Oh yeah.” You can’t shake that easily. But I found myself pinching pennies while building a house, so I decided to give Trader Joe’s another look. Once it gets in your DNA, you kind of go, “Oh yeah, TJ. That’s the stuff.”
And then you moved to Canada, where there are no Trader Joe’s stores.
I opened the shop as a response to being in Bellingham, which is this portal to freedom that Canadians use. It’s just close enough that you can grind your way over the border. I was in the Trader Joe’s in Bellingham, and it was full of Canadians, just grabbing the stuff. The parking lot was pandemonium.
I was looking for a retail gig, and I wanted to be in Vancouver. So I looked into it, and just on the logistics side, it was pretty much impossible. The Canadian import system is tuned for the status quo, which is big trailers full of stuff from Costco. So even though these prices are tantalizingly low, the logistics of getting things over the border legally are a barrier to entry that dissuade a lot of people from bothering.
How did you get across the border with a truck full of shopping bags? Didn’t that look shady?
You look in the van at any given time, and there are 150 bags of groceries jammed in a white panel van. I don’t put them in boxes. The first time, there was a big guy in a bulletproof vest. He’s looking at me, and he’s got all my paperwork, and I’m nervous. I’m an adult and I’m sweating. He’s looking at all the papers, and he looks up and he says, “You got those peanut butter cups? Those little ones?” And I’m just like, “Are you kidding me?” With a big smile, he goes, “Yeah, yeah, come on, come on.” He shows me the computer and gets me dialed in, and I haven’t looked back. Now the customs agents know who I am. They love the story. As long as I do the paperwork, they’re good.
What’s your markup on the food?
I thought, Well, I’ll just mark everything up, you know, $1.00. We’ll see what happens. And I lost a lot of money — I mean, $3000 or $4000 in the first month. So then I went up to $1.50. My prices are still cheaper than, or comparable to, Safeway or Whole Foods. Definitely cheaper than Whole Foods.
So let’s talk about the legal nightmare. I can imagine it hasn’t been easy.
It wasn’t lost on me that I might get in a bit of trouble. A lawyer said, “Whatever you do, you’ve got to come up to the line” — he had just described where the line was, from a trademark-infringement point of view — “and step back from it.” I said, “Well, what if it was disguised as a Romanian bakery?” The building we rented was a Romanian bakery that had gone out of business. And he goes, “That’s perfect.” So we opened up, and all we had was Trader Joe’s stuff in the window and a sign I inherited that said “Transylvania Trading.” I made a banner that said “I
How did you spread the word?
People would come in, and I would say, “Don’t tell anybody.” And, of course, they would tell — that’s like rocket fuel for word of mouth. Obviously, I’m not going to advertise. Canadians are very rules-y, so they would come in and go, “Well, this can’t be legal.” And I’d say, “Well, tell me which law it is I’m breaking. They’d respond, “It says right on the back of the box, ‘Exclusively Distributed.’” “Yeah, but that’s not a law. You can’t legislate on the back of a cereal box.”
So there’s a place in Brooklyn that only sells Nutella products. It was called Nutelleria, and then they opened with the name to Nuteria. Strange, but is it illegal?
So companies have trademark laws at their disposal. Basically, what you’e trying to do is not confuse customers. If you’ve got a trademark for Nutella, and you’re in the marketplace, everyone wants to know what the authentic Nutella thing is — that’s it. If some place called Nutelleria shows up, that’s shorthand for a place that sells Nutella. Are customers confused? Nutella would argue, “Well, yeah, because they’re using Nutella in the name. They are implying that this business is authorized or affiliated with us, when they’re not.” It’s a gray area.
There’s this place called Charbucks. It’s a riff on how Starbucks is known as Charbucks because they burn the hell out of their coffee. It has nothing to do with Starbucks, and Starbucks freaks out and sues them, and these guys choose to fight. They won, because Starbucks went out and did a survey, and like 60 percent of the people thought maybe it might be affiliated with Starbucks, but maybe not — it was kind of gray. People are smarter, so they sided with Charbucks. Charbucks is open.
Inside Pirate Joe’s.Photo: Mike Hallatt
When did you first hear from Trader Joe’s?
They sent me a cease-and-desist letter saying I had to close within seven days. The first thing I did was put the thing in the window. It was actually some pretty brisk business because everyone thought I was going to close, so they were getting their stuff while they could. And I was like, “That’s designed to scare us. You ignore that.” And then a whole year went by, after that letter arrived, where there was radio silence from Trader Joe’s for about a year. Until the first lawsuit hit.
We moved to a new location and put a sign in the window that said “Pirate Joe’s.” A journalist has given us the nickname, and my lawyers — well, when I say my lawyers, these are people I call up randomly and ask for free advice — were like, “Yeah, that’s going to be trouble.” So it wasn’t long before that happened that Trader Joe’s got pretty upset, and then they sued me. So we started out as this bizarre top-secret place disguised as a Romanian bakery. And I didn’t really predict the rest of it, like winning the lawsuit.
For me, the problem is that Trader Joe’s will not discuss anything. There was one opportunity early in the litigation where, after we won the first round, there was a request for mediation. Their lawyers said, “Can you come up with any ways to solve this?” and I said, “Sure, how about if I turn this into a Trader Joe’s café, where everything in the café is concoctions made out of Trader Joe’s stuff?” They said, “Great idea, but we won’t supply you.”
Were you surprised by your success?
I didn’t ever want to be this guy sneaking around. But the shift in people’s perceptions really cemented after Trader Joe’s lost the first round of the lawsuit. People were taking my word for it that this was indeed legal, but when it was affirmed by the courts, everybody who was on the fence jumped on our side. One of our little slogans is we’re unauthorized, unaffiliated, and unafraid. People love that. It’s like one part Occupy Grocery and one part David versus Goliath.
And we’ll admit everything: Yeah, we’re buying it from you full retail. Here are all of our receipts. What is wrong with that exactly? And this idea that there’s brand harm — I don’t see how you get there. We’re introducing new people to Trader Joe’s every day. When Trader Joe’s comes up here, everyone’s all set.
How has it progressed? Are you still embattled in lawsuits?
We won the first two rounds. I knew legally that I was fine, and that it was always going to be about whether I could afford to fight. But it’s all paid for by Wawanesa [an insurance company]. So $120,000 later, I haven’t paid a bill. And Trader Joe’s is probably well north of $300,000 at this point. I’d prefer if they took the money and put it into a new store, but hey, that’s the way it goes. If it went to the Supreme Court, I’m covered all the way up there. It never will, but it’s pretty amazing.
We’re on round three at this point. They’ve appealed it to the 9th Circuit, which is based out of San Francisco. And we don’t know what’s going to happen there. If they uphold the dismissal of this lower court, then it’s established law, and Trader Joe’s has basically set themselves on fire with this one.
Can you actually show your face in Trader Joe’s stores?
They got a picture of me from some press thing, so a year ago, I’d go into a Trader Joe&’s, and within ten minutes, someone would be tapping me on the shoulders saying, “We’re not going to sell to you.” Now I hire shoppers off Craigslist. It sounds sketchy: “So, you’ve got to sneak into Trader Joe’s for me and buy groceries.” I ended up with this little crew: I’ve got a couple of farmers with two kids, and they don’t make enough money growing organic stuff. I’ve got a gal who is a divorcée from Boston, who looks kind of like Olivia Newton John, and she’s always in Spandex, and she just loves doing it. I’ve got stoners and they smell like pot. I pay them either by the hour or on commission, depending.
Outside Pirate Joe’s.Photo: Mike Hallatt
How much do you buy at a time?
Well, just one-sies, two-sies. We don’t want them to have any way of detecting that we’re doing it, and we don’t want to clear out the shelves. That wouldn’t be fair. If I go shop in L.A. — I’ve done that once to see how that would work — I’ll just tell people that I’m shopping for Tom Cruise. L.A. is so crazy that people go, “Of course you are.” I can get anything I want out of L.A.
But I bought $15,000 worth of stuff in one trip, rented a van, and then I forgot about the heat wave. That was just a disaster. So I ended up having to check into a motel, hire a guy to help me with all the groceries, and put them in the air-conditioned hotel room, until it cooled down and I could drive through the night.
What are your best-selling items?
The dark-chocolate-covered peanut butter cups, and the dark-chocolate-covered almonds with sea salt and Turbinado sugar. If you come into the store and you’re not sure what’s going on, we give you one of those and then you start paying attention. We chase people around and give them those things. Believe it or not, the Inner Peas — the salted peas; they’re like snap peas that are basically just a lot of salt — can’t keep those in. I say we can tell when we’ve got the right product when people grab it and then immediately pull it to their chest.
How would you like to see this play out?
What Trader Joe’s should do is open in Vancouver. It’s just not fair that they set up this business in Bellingham. It would absolutely put me out of business, and rightly so. We’re just a market response. And if Trader Joe’s comes up here, those all go away, and my rationale completely goes out the window — which is fantastic, because this isn’t a business that I intended to last this long. When your supplier hates your guts, it’s kind of hard to do business.
I’ve never worked harder for less money in my life. But I’ve never had more fun, either. Part of my rationale for sticking with this, despite all the adversity, is this could establish a law for the next kid that goes, “Hey, I want to do something.” You read about that kid in Cornell that was buying books in Thailand and then reselling them? That’s the same thing, but I’m buying it retail from the official people — the full Monty — and then just taking it away and selling it to people that have no Trader Joe’s. There’s no legal argument for those guys to make. But they’re pressing on. The problem is that I’m suddenly in the grocery business. Now, who the hell wants to be in the grocery business? I’ve got myself into a bit of a pickle.
Are you still a Whole Foods person?
I’m not a TJ’s diehard. I’m more of a Whole Foods person. Like, there’s a Whole Foods across the street, that’s where I … I don’t eat that much of the stuff in my store. It’s incongruous for me to be Trader Joe’s best customer. This has really become more about saying, “Don’t push me around.”