Smucker, Trader Joe's and a Battle Over PB&Js

0:05Over the weekend, I went into my kitchen to conduct a very serious, hard-hitting interview. What is your name? Bedford. What's your full name? Bedford Gunderson. An interview with my son, Bedford. And how old are you? Two. And who am I? Daddy! I wanted to ask him about one of his favorite foods, the peanut butter and jelly sandwich. So we've got two sandwiches here. Okay, let's open them up. Specifically, I wanted to ask him about two competing versions of the PB &J. The Uncrustable, which is made by J.M. Smucker, and an alleged copycat, made by Trader Joe's. If you're unfamiliar, these packaged sandwiches both contain peanut butter and jelly on white bread.

0:55They're both crustless, crimped at the edges. They kind of look like giant round dumplings. They're both stored in the freezer and thawed before eating. I wanted to know, from an expert like my son, is it yummy? It's yummy. Whether he could tell the difference between the two. Are these sandwiches the same or different? Same. The same? The sandwiches do look a little different. One is a bit bigger, and the bread has a slightly different texture. But my two-year-old didn't seem to notice. And that's exactly what's keeping big food companies awake at night. This month, J.M. Smucker sued Trader Joe's for trademark infringement, saying that Trader Joe's private label version, aka its store brand, is a, quote, obvious copycat and should be destroyed.

1:45On its face, this is a story about a fight over peanut butter and jelly sandwiches. But, you know, if you dig a little bit deeper, it's really the story of this, like, decades-long battle for power in American grocery stores. and it's a battle between, you know, name brands that have reigned for a really long time and the private label products that are stealing more and more market share. How would you describe the worry that big food sort of has right now when it comes to the threat overall from private label products? Well, in a nutshell, big food companies are worried that store brands are going to eat their lunch.

2:24Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen. It's Tuesday, October 28th.

2:37Coming up on the show, what a fight over PB &Js reveals about the growing power of store brands.

2:59My son is not the only person in my household who loves peanut butter and jelly sandwiches. In fact, if I was forced to choose one thing to eat for the rest of my life, I'd probably choose the PB &J. And not only is it one of my favorite foods, it's also the subject of one of my favorite children's songs by Rafi. Oh, one for da-da, one for da-da-da-da, that song. My colleague Jesse Newman knows it too. Sing it for me. A peanut butter sandwich made with jam, one for me and one for David Amrita. The peanut butter and jelly sandwich is also beloved by J.M. Smucker, the food giant that makes Uncrustables.

3:34The company started selling the product in the 1990s, and it's grown into a more than$900 million business. Smucker's Uncrustables, all the goodness of a PB &J without the crust. But J.M. Smucker's lawsuit against Trader Joe's is about more than just a single sandwich. It's about a growing threat of something called private label brands. What is this term private label? What does that mean? Can you define it for us? Sure. So private label, or sometimes they're called store brands, this refers to products that are sold by supermarkets as an alternative to name brands. For a long time, private label products, which are sometimes called generics, house brands, or store brands, were not very cool.

4:20They were developed to meet a very specific consumer need. The unemployment rate soared to 8.2 % nationwide last month. During the 1970s, when a wave of inflation started to strain budgets, stores started producing cheaper, more generic versions of popular products. So I saw an ad for some old products, old store brands. Eagle offers you even greater savings with generics. A new no-frills value choice. And they just had these plain yellow or white packaging with big black lettering that said dog food or orange flavored drink or cherry pie filling. Just look for the plain yellow and black generic label and save even more on nutritious food and serviceable household products.

5:03These products, they tend to be less expensive than name brands, but retailers really like them because they are often more profitable. So they're cheaper to produce. They don't carry the big marketing costs. They're just often a cheaper alternative. Generics, the no-frills value choice from Eagle, the food expert. What kind of a reputation historically have private label products had in the past? So for a long time, store brands had a real stigma to them. The perception was that they were knockoffs, cheap generics that were less good quality. The products themselves were okay. You know, we've heard from readers who wrote in to say, you know, look, when I was growing up, money was tight and my family bought store brands.

5:47and I always envied the kids who had national brands like Coke and Pepsi and Twinkies. Like, I thought they were rich. So they really had a sort of negative connotation. By the 1990s, though, retailers like Trader Joe's were offering more than just nondescript boxes. The packaging had eye-popping art and personality. Trader Joe's comes on the scene and their products are fun and exciting. Some items were recognized for their quality and developed a cult following. And beyond Trader Joe's, other retailers upped their private label games too. Aldi has grown in popularity, and these are stores that sell mostly private label products.

6:29You can also think of Costco. You know, they launched their Kirkland Signature product in 1995. And these, I would say, all of these stores have had a real hand in, you know, in sort of turning the tide or changing the perception on store brands. While the perception of private label brands used to be just low-budget knockoffs, over time, retailers started investing more in their products, improving their packaging, and making them better. You know, stores have really changed their goal with their own brands. So their goal in many cases now isn't just to copy or emulate the national brands, but it's to beat them.

7:12What's going on, y 'all? I was at Trader Joe's. They say these better than Reese's. So let's see. I ain't gonna lie. It was perfect bite-sized. Costco just dropped a vodka soda. So let's compare it to the OG high noon and see what you're doing. Nowadays, people brag about snapping up fines from store brands. Products are marketed as high quality. Think about, you know, Good & Gather at Target or Whole Foods 365 brand. And, you know, especially with younger consumers, a lot of Gen Z and millennials, they just see store brands as fun and cool. I think I would rather go one aisle over and get the Aldi Simply Nature organic salsa.

7:49This is only$1.49, and this is a great deal. This is eight ounces. We have 11 exclusive Albertsons brands. And for lack of time here, I'm just going to highlight my three I'm most passionate about, and that's their signature.

8:03So it seems like that thing that used to be a stigma has like almost completely flipped onto its head. It's true. And the other big part of this is inflation. You know, the perception of store brands has changed, but the necessity for them has also changed. And it has driven more and more people to shift to store brands. Except this time around, you know, a lot of consumers are sticking with the store brand. Private label market share has been climbing steadily for years. According to one market research firm, it accounted for 20 % of total store sales over the past year. So one in five dollars that a consumer spends at a store is on a private label product.

8:43And there's a feeling that they're having a moment. They are very much in ascendance. They're sort of chipping away at brands' market share. And that's got food companies on the defensive. And how are these big brands starting to fight back? So, one response that the big brands are having to more competition from store brands is that they're suing. This brings us back to the fight we told you about earlier. The fight between Smucker and Trader Joe's over the peanut butter and jelly sandwich. It sounds like a real sticky situation. Very sticky. I mean, talk about a crustity battle. How many of these do you have, Ryan?

9:23That's it. That's it. The showdown between Smucker and Trader Joe's is next.

9:46Big food has encountered some big problems lately. Inflation, depressed sales, changing consumer habits. In Smucker's case, it's struggling to digest a recent$5 billion acquisition of Hostess, the company behind Twinkies and Ding Dongs. You know, Smucker, like other big food companies, is just dealing with a lot of challenges right now. They've got a lot to protect here with Uncrustables. You know, this is verging out a billion-dollar brand, and they just got to protect their golden goose. That means that tiny sandwich is doing a lot of heavy lifting. So Uncrossables has to keep working for Smucker.

10:25They're going to try to pull out all the stops to protect their business. Okay, so let's just start with the basics here. What exactly is Smucker accusing Trader Joe's of? So Smucker sued Trader Joe's earlier this month, and they said that Trader Joe's sandwich is an obvious copycat. and Smucker's suit, their lawsuit, alleges that Trader Joe's infringed on its trademark in a couple of different ways. It says that it infringed on their trademark by copying Uncrustables, copying the shape, their round pie-like shape is what they call it. And then they refer to the distinct peripheral undulated crimping around the edges.

11:10So essentially... Very scientific. Yes, essentially the markings around the edges that kind of hold the two pieces of bread together and keep all the peanut butter and jelly in. And they also are claiming that Trader Joe's copied parts of Uncrustable's packaging. And this would be the image of the sandwich on the Uncrustable's box in which there's a bite taken out of it. And it shows you sort of the filling inside. And they're concerned about the blue color that they say Trader Joe's stole from their logo. Smucker says it has no issue with others selling prepackaged, frozen, thaw-and-eat crustless sandwiches.

11:48But the company said its focus is on, quote, protecting the unique trademarked design that represents the high quality associated with the Uncrustables brand. It also says it wants to prevent consumer confusion. What has Trader Joe's said in response, in its defense? Trader Joe's hasn't said anything thus far.

12:09Trader Joe's isn't the only company Smucker has gone after. It's also accused regional snack companies of copying its Uncrustables. In 2022, Smucker sent a cease and desist letter to a Minneapolis startup called Gallant Tiger. The company's co-founder said they responded to Smucker but never heard anything more, and the company didn't change its products. This summer, Smucker also settled a lawsuit with a frozen snacks company called Chubby. The company has ceased operations. So what is Smucker asking the court to do? What does it want from Trader Joe's to stop making the sandwich? Yes. Well, they want a few things.

12:44They want to bar Trader Joe's from making any more of the sandwiches. And they also, they're looking for a variety of different monetary damages. They're saying, give me your lunch money, essentially. Exactly. And they don't just want the lunch money. They also want the lunch. They want Trader Joe's to deliver all of their products to Smucker to be destroyed. They want to destroy all of Trader Joe's sandwiches? Yeah, they say they want Trader Joe's to deliver up to Smucker for destruction all products, containers, labels, packaging, wrappers, signs, prints, banners, posters, brochures, literature, catalogs.

13:22Need I go on? Oh my goodness. I will say when I went to buy the Trader Joe's version, twice now I've seen it at the store, and it was almost sold out. You know, there was very low stock. In the past year, lawsuits like this have spread from battles over yoga pants. Lululemon is suing Costco, accusing the retail giant of unlawfully trading on its reputation, goodwill and sweat equity. Through a battle over cookies. Mondelez International Foods is suing Aldi grocery stores. Mondelez claims Aldi copied its packaging for the store's private label snacks. In a court filing, Costco denied that it infringed on Lululemon's intellectual property.

14:05Jesse expects lawsuits like these, and the one between Smucker and Trader Joe's, to become more common. On the surface, this is a story about a fight over peanut butter and jelly sandwiches. But if you dig a little deeper, it's really the story of a decades-long battle for power in American grocery stores. And so, you know, I would say that it's really just another sign of trouble for big food companies who are in the thick of it right now. They are fighting fires on so many fronts. And most importantly, people are buying less of their products. To Jesse, it's a sign of the precarious position big food is in.

14:43They're not just afraid of being copied. They're also afraid of being replaced. And so these companies are just really struggling to stay relevant. And they're trying not to lose control in grocery store aisles. But consumers are changing and they're trying to keep up.

15:07That's all for today Tuesday, October 28th The Journal is a co-production of Spotify and The Wall Street Journal Additional reporting of this episode by Chris Kuo

15:22Can you say thank you for listening? Thank you for listening See you tomorrow See you tomorrow Great Awesome, Eddie. That was wonderful.