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Costco Reports 8% Rise In Beverage Alcohol For First Three Quarters As Spirits Sales Lead Growth

May 31, 2013

Issaquah, Washington-based Costco reports that sales of beverage alcohol are up 8% in the nine months ending May 31, the first three quarters of its fiscal year. The company is projecting nearly a 10% rise for the full year. Currently with 627 locations and with nine more units planned to open before September 1, Costco is one of the largest retailers of beverage alcohol in the U.S. and in foreign markets including Canada, Mexico, U.K., Japan, Taiwan, Korea and Australia. Shanken News Daily recently spoke with Annette Alvarez-Peters, Costco’s assistant general merchandise manager for wine, spirits and beer, about sales trends.

SND: How are sales of beverage alcohol at Costco for the first three quarters of your fiscal year?

Alvarez-Peters: We are up 8% for the first nine months of our fiscal. Spirits sales are healthy, up by double digits (comparable sales without Washington State). Wine is up by high single digits. While beer is up, it’s not performing as strongly as spirits and wine.

SND: What trends are you seeing in wine?

Alvarez-Peters: Domestic wines continue to drive sales, representing 65% of our wine business. The domestic categories with double-digit increases are red blends, dry rosés, Petite Sirah and Chardonnay. Imported wines, especially those priced at over $12, continue to improve with double-digit increases. Wines from the Rhone and Spain are performing quite well for us.

SND: What’s the most popular price point for wine at Costco, and has there been any change in the last year or so?

Alvarez-Peters: The popular price points for wine are between $8.99 and $15.99, and the ring is 5%-7% better than last year.

SND: Is the Moscato trend still strong? Are other recent wine trends holding?

Alvarez-Peters: Prosecco is a healthier category than Moscato, which has fallen off a bit. Still red table wines, such as Menage a Trois, continue to do very well. There isn’t much interest in the chocolate wine category, which appears to have run its course.

SND: How’s the vodka category performing?

Alvarez-Peters: Vodka continues to lead the spirits category and is up by high single digits. We introduced a Kirkland Signature American Vodka, six times distilled, 1.75-Liter for $13.89 in August 2012. This item has really taken off and has exceeded our projections. We rotate flavored vodkas in and out of our system, and those items create excitement. But they remain a small percentage of our vodka business.

SND: What about Tequila?

Alvarez-Peters: Tequila increases are the same as vodka. Kirkland Signature Silver Tequila 1.75-Liter at $18.99 is strong, and we do very well in the higher-mark Tequilas such as Patron, Milagro and Don Julio 1942.

SND: Are you seeing renewed interested in whiskies across all categories, not just craft?

Alvarez-Peters: The whisk(e)y category is up by double digits. Bourbon and Scotch are leading the charge. We continue to test various craft whiskies and spirits items, as they bring the treasure hunt atmosphere we’re seeking.

SND: How are you responding to the interest in craft beers? How are traditional beers faring?

Alvarez-Peters: The craft segment now represents 30% of our beer sales. We’re experimenting with many local breweries in the various states where we do business. However, supply can be a challenge – we are limited to the inventory stocked at the distributor level. We’re finding success in different promotions with 750ml and larger sizes. This is an exciting category, which is seeing double digit growth. Domestic beers are struggling, while imported beers are up by single digits.

SND: How is your business in the state of Washington? How many stores are you currently operating there?

Alvarez-Peters: We currently have 27 locations in Washington State and our business is doing very well. In spite of the strong new retail competitors there, we continue to grow the business.

SND: What percentage of your beverage alcohol sales are in the Kirkland brand? Is that a growing share? Which Kirkland brands are your best performers?

Alvarez-Peters: Kirkland Signature continues to grow as we bring new items to market. It represents about 13% of the total beverage alcohol department. Kirkland Signature spirits are our best performers, especially American Vodka, ready-to-drink Margarita (1.75-Liter) at $9.99 and Silver Tequila. As for Kirkland Signature wine, our best performers are Sonoma Chardonnay (750ml) at $6.99 and California Cabernet Sauvignon (1.5-Liter) at $7.99.

Costco Wholesale Corp – Global Sales
(billions of US dollars)
Fiscal Year1 Percent Change2
Category 2011 2012 2013P 2011-2012 2012-2013P
Wine, Spirits, Beer $2.58 $2.84 $3.12 10.1% 9.9%
Total – All Categories $87.0 $97.1 $103.1 11.6% 6.2%
1 twelve months ending August (2013 is projected, ending September 1st)
2 based on unrounded data

Source: Costco

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