retail news in context, analysis with attitude

The Chicago Tribune reports that while Costco did not have a great holiday season, there was one major bright spot for the retailer - booze.

"Alcohol sales have surged at the warehouse-club chain, lifted in part by the cult status of Costco's Kirkland Signature-branded liquors," the story says. "Many customers swear by the private-label products, and some are even convinced that the spirits are actually top-shelf liquors such as Grey Goose and Tanqueray hidden behind Costco packaging." While quality is a major, draw, so is price: "Costco's markup on its alcohol is in the range of 10 percent to 14 percent -- extremely low by industry standards. In contrast, most retail liquor stores add from 25 percent to as much as 45 percent, especially for premium items."

Indeed, the Tribune reports that "alcohol brought in $3.8 billion for Costco in its latest fiscal year, with wine sales accounting for almost half of the total. The category has grown 46 percent during the past five years," outpacing every other category at the store.

And now, the story says, other retailers - including Target and Whole Foods - are trying to mimic Costco's approach to alcohol, establishing their own private label booze brands that they hope will differentiate them.
KC's View:
One of the challenges in trying to mimic what Costco does in its alcohol departments is trying to replicate its pricing discipline. It seems to me that Costco's approach is one that reflects its broader DNA ... and that is tough to replicate.

I heard a funny story the other day on one of the cable news channels about Sergey Kislyak, the Russian ambassador to the US who has gotten a lot of publicity lately because of allegations that he has a too-cozy relationship with Donald Trump and his minions. Someone was saying that Kislyak has a reputation for throwing great parties, but that people started talking about how much trouble the Russian economy must be in since at a recent party, they were serving Costco private label vodka.

On the other hand, maybe Kislyak just knows something that the rest of Washington doesn't.