Costco Wine Buyer Talks Shelf Strategy

Retail giant favors dependable brands but also buys local for 'treasure hunting' consumers

by Andrew Adams
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Evan Goldstein, president and CEO of Full Circle Wine Solutions, sits on a panel with Anette Alavert-Peters, chief wine buyer for Costco.
Santa Rosa, Calif.—How does one get their wine sold at Costco?

It was the question on the minds of those in the audience at the recent Wine Conversations event in Santa Rosa, and one the general merchandise manager of Costco’s beverage alcohol division, Annette Alvarez-Peters, diplomatically answered for the crowd of mostly winemakers and other winery employees.

Alvarez-Peters prefaced her remarks by saying that there are now more than 9,000 wineries in the United States (see “North America Winery Count is Now 9,872”), and the typical Costco location only carries about 235 SKUs, which also includes beer and spirits in places where regulations allow all three to be sold in the same location.

Costco has 12 buyers spread over all key regions of the United States, and Alvarez-Peters said they need to select brands that will deliver the quality and low prices on which Costco has built its reputation and successful business.

Nearly $4 billion in beverage alcohol sales

The retailer did $116 billion in sales in fiscal year 2016 and sold $3.9 billion in wine, beer and spirits during the same period. Costco now operates more than 700 locations worldwide with 506 in the United States. The company is supported by members in 49 million households.

Alvarez-Peters said you may make a great Cabernet Sauvignon, but a typical Costco location has room for just 30 Cabs—and those have to deliver that consistent quality and value for the chain’s members. “We have to say no more than yes,” she said.

She said the regional buyers try to stock their stores with brands that are produced locally and also reflect the preferences of members in those regions. And while Costco may have to keep some of the same brands in its rotation, Alvarez-Peters said half of their wine SKUs change regularly. “It really has to be, ‘Why is your item so compelling, and why does your item fit in our section?’”

She mentioned one winery that had surveyed several Costco stores in its area and then successfully pitched the buying team on a particular wine that it said could fill a gap in what those stores were selling. Costco also has a general strategy of adding new items as part of a “treasure hunt” to get its members to wander around the store and buy items that weren’t on their shopping lists. “The ‘wow’ items are the ones that get members to come back,” she said.

Alvarez-Peters and the rest of her buying team write regular columns about wine and the wine regions of the world in the Costco newsletter to members and brands featured in that publication do typically enjoy a sales bump. Positive reviews and feature articles in consumer wine magazines also tend to resonate well with Costco shoppers, although she said it’s definitely not true that the retailer only stocks its shelves with wines that have earned scores of 90 points or more.

While “America loves scores” when it comes to buying wine, Alvarez-Peters said many brands sold in Costco are not in the 90-plus-point range.

Trends in wine sales

In terms of larger wine trends, Alvarez-Peters said the trends seen in the wine industry at large are also reflected in the store. Rosé has become a year-round seller rather than just a seasonal wine, consumers are buying more wines priced at least $10 per bottle, and 3-liter boxes of premium wine are also doing well. Sparkling wine and Champagne sales are stronger than ever, and Alvarez-Peters confirmed Prosecco is indeed on fire. “I’m astounded by the number of bottles sold,” she stated.

Sprits producers have done a good job tapping into that “wow” category Alvarez-Peters said Costco consumers enjoy. She said a bottle of Monte Carlo vodka bedazzled with Swarovski crystals did rather well during the holidays. The store earned itself local TV news coverage in the regions where it stocked rare, $17,000 bottles of The Macallan Scotch whisky and sold all of them the week the stories broadcast.

Costco worked with some spirits companies on special packages of small sampler bottles and also did quite well with box sets of wines from Bordeaux that sold for $29 to more than $100.

The chain’s private-brand program, Kirkland Signature, is also doing well and now totals $29 billion in sales, part of which is wine. The Kirkland wine program began in 2003.

Alvarez-Peters said the goal is always to deliver equal or greater quality to comparable products with savings of around 20%. The company has worked with Kunde Family Winery in Sonoma County, Millbrandt Vineyards in Washington state and others to produce Kirkland wines, which have even received some critical acclaim. Costco uses the Kirkland program to fill gaps in its lineup and also provide consistency for certain products.

Costco shoppers are dependable, and if a winery can find that right combination of consistent quality and price getting a placement with the retailer would be an enviable position as Costco has plans to double its stores in the next decade. “Brands are what members look forward to; that’s what keeps them coming back,” Alvarez-Peters said.

The Wine Conversations symposium is organized by French closure supplier Diam and its U.S. distributor G3.


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