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Buying in bulk at affordable prices is the name of the Costco game, with customers gushing over everything from its sheet cakes and hot dogs to its coveted rotisserie chicken and the entirety of the profitable Kirkland Signature line of products. Every Costco shopper also gets to take advantage of the impressive and diverse wine selection, which can feature upward of 150 SKUs (the unique number given to each product). Many bottles carry a price tag below $20, and some even below $10 a pop (while Costco does sell bottles for over $100, these are rare — and still good bargains). This number of affordable wines for a mega retailer is no easy feat, and Costco manages it through margins.
Costco’s affordable pricing is due to its product markup cap of 14% on regular goods and 15% on Kirkland-branded goods. The only way to take advantage of that cap is through Costco’s membership program — which makes up a large chunk of the chain’s overall net profits. Customers can choose between the $65 Gold membership, which lets them purchase products at any Costco location worldwide or online, or the $130 Executive membership, which has an added bonus of dedicated shopping hours, various insurance benefits (including travel), and an annual 2% reward on eligible purchases. Costco’s customer loyalty is strong, with a renewal rate usually hovering above an astonishing 90%. The overarching loyalty program business model helps give Costco the ability to negotiate cheap pricing in bulk, and is applied to every department, including wine, beer, and spirits.
Why Costco wine is worth the buy
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These low merchandise margins also let Costco be incredibly selective when it comes to choosing its line of products. Offering only around 4,000 SKUs per location — compared with the 30,000-plus carried by other grocery retailers — Costco’s buying power is able to simultaneously maintain quality control while negotiating lower prices across all departments.
The brand’s stellar beverage department grew in large part thanks to its former wine buyer, Annette Alvarez-Peters. Her focus was to uphold the brand’s ethos of selecting products that reflected both high quality and low price points. She also helped develop the brand’s Kirkland Signature wines, which, like Costco itself, have a cult following. Made by wineries exclusively for the brand, these wines are some of the best buys you can find at Costco (or anywhere else), with many of them below $15 per bottle.
Costco regularly rotates its wine offerings due to a multitude of reasons, including harvest to consumer trends, keeping customers coming back to see what deals they can score. Additionally, with younger generations drinking less and GLP-1s curbing alcohol cravings, Costco has seen a rise in winemakers’ interests in being a part of its stores. Costco is a trusted brand, and suppliers are all but guaranteed a large-volume sale — everybody wins. With a warehouse only stocking some 200 SKUs of wine, beer, and spirits, getting your wine onto a Costco shelf is akin to getting your book onto Oprah’s Book Club list. All of this competition certainly helps keep those prices down.
Dining and Cooking