Two Buck Chuck – Procurement Strategy and Infamous Trader Joe’s Wine

Trader Joe’s has amazed people for years by somehow delivering quality products at near bargain bin prices. How do they do that? Every procurement professional wants to know their secret and reproduce this stellar cost-savings procurement strategy with their own product and provider.

We look at Trader Joe’s now famous Charles Shaw wine, also known as “Two Buck Chuck,” to get a glimpse into how they keep winning when it comes to their killer combination of high-quality products at surprisingly low prices to the public.

What Is Two Buck Chuck?

Charles Shaw wines is an American brand of bargain-priced wine, mainly derived from California grapes. The brand started as a winery owned by Charles F. Shaw (hence the original name). But after it went bankrupt in the mid-90s, its trademark was acquired by Bronco Wine Company, which now produces the wines and supplies California retailers with them at bargain prices.

The nickname “Two Buck Chuck” was given to the wines when they were introduced in 2002 at the popular grocery chain Trader Joe’s. At a cheap $1.99 per bottle, “Two Buck Chuck” earned its now-famous moniker.

Now, people love Two Buck Chuck, and for good reason. It’s cheap, it comes in a variety of grapes, and people love to debate whether the wine is quality. But whatever you may think regarding that, the price is right (the exact price has fluctuated from $2-$4 over the years depending on whether it’s shipped to other states than California, etc.), and we aren’t the only ones who think so. The proof of Two Buck Chuck’s popularity is in the sales numbers, with the wine selling 600 million bottles in its first decade (between 2002 and 2013) alone.

The procurement folks must be doing something right. So, how do they do it?

Two Buck Chuck and Procurement Strategy

Common sense would assume that keeping a decent wine within the $2-$4 range is an incredible feat that’s going to come with its challenges. This is why excellent procurement strategy and sourcing knowledge are needed.

First, you have to source the grapes. As already stated, sourcing locally from California grape vendors helps keep this brand’s costs at a minimum while still enabling them to provide quality vino. After all, California is known for its exceptional vineyards and grapes.

But what you may not know is that costs are kept even lower by sourcing the grapes not from the renowned Napa Valley but from the lesser-known Californian San Joaquin Valley. Higher heat in this valley allows for producing a higher quantity of grapes, if not a higher quality. And consumers reap the benefits of that trade-off at the cash registers.

Packaging materials and the price of other processes also must be considered, with costs kept to a minimum. Rather than being aged in traditional oak barrels, Two Buck Chuck wines are fermented with oak chips before they’re bottled in lightweight glass (reducing shipping costs). Then, they’re sealed with corks that are only partial cork (kind of more like particleboard, with little cork bits glued together).

But the real secret (or not so secret now) to how Two Buck Chuck keeps its costs so low is in its production process—the wine is made in mass quantities through a completely automated process. You’ve heard of getting more bang for your buck, and in this way, Two Buck Chuck provides more buzz for your buck.

Two Buck Chuck Increases to Four Buck Chuck

Over the years, the price of Two Buck Chuck has increased (with costs reaching as high as $4 in some states). But to the joy of many, it has returned to its sweet price tag of $2 (in California stores at least).

The uptick in price has been mostly attributed to inflation and varying state distribution costs and taxes, which is why only California retailers have been able to return the wines they sell to their original $2 price tag worthy of the brand’s name. To say that Trader Joe’s customers were excited about the triumphant return of the rock bottom prices would be an understatement. A sign at a San Francisco store at the time announced, “Two Buck Chuck is back! ...with a vengeance. Mmmm...Tasty revenge!”

According to Matt Sloan, vice president of marketing and product at Trader Joe’s, the cost-savings measures behind the ability to reel back the prices centered on working with Charles Shaw producers to make improvements to packaging (using less glass and lighter on the cork). According to Shaw, “These cost savings have put us into a position where we can pass a lot of that savings right onto customers.”

Inflation, Procurement Strategy, and the Future of Two Buck Chuck

The question remains: Can Two Buck Chuck stay priced at $2 or even $4? Probably not.

And though we do not personally know the procurement team behind this beloved brand, we sure know they have their work cut out for them, as making a procurement strategy for this well-loved wine would be a major challenge. Are you facing similar challenges in your procurement operations?

Our advice (for you and the Trader Joe’s procurement team) moving forward is to spend some time reining in tail spend, finding additional packaging suppliers, and running a new sourcing events to find alternatives in case of a disruption. For example, what if California grapes can’t be accessed in the event of yet another California wildfire going uncontained? In such a case, these folks would need to find a new place to source grapes from as a solid Plan B.

We also mentioned the brand uses automation (as you might as well in your organization). Ask yourself: What else can be automated? Finally, take a look at transportation and shipping, like with Two Buck Chuck for an example. How can you minimize costs while transporting Two Buck Chuck from California across the country, all the way to the East Coast?

All of this is excellent food for thought for your procurement strategy. After reading this article, you’ll likely be consumed with thoughts of delicious wine and ways to make your procurement strategy shine.

The good news is that we regularly offer insightful and powerful Procurement Foundry and FORGE events to help you optimize your procurement journey. And you are officially invited! Join the Foundry today, and see what all the buzz is about.