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Costco To Open 20 New Units in Fiscal 2012

January 20, 2012

Issaquah, Washington-based Costco has reported strong fourth quarter sales of beverage alcohol for calendar 2011 and plans to open 20 new units before the end of its 2012 fiscal year, ending August 31. Shanken News Daily recently spoke with Annette Alvarez-Peters, Costco’s assistant general merchandise manager for wine, spirits and beer, about the brands and categories that performed well over the recent holiday season.

SND: How were calendar fourth quarter sales at Costco?

Alvarez-Peters: Sales were good. We tracked an increase on wine that was very similar to the IRI data (which reported table wine sales up 7.4% in value and 4.9% in volume in the 12 weeks ending December 25). And we were a couple of ticks higher on spirits, and also a bit higher on beer.

SND: Last spring, you said that global beverage alcohol sales at Costco were projected to be $2.5 billion in your fiscal 2011 ended August 31—up 6.4% over the previous year. Was that correct? What are your projected global beverage alcohol sales for fiscal 2012?

Alvarez-Peters: Our sales in fiscal 2011 were actually up 8%, to $2.6 billion. We’re projecting a similar increase for our fiscal 2012.

SND: What were your biggest sellers during the holiday season?

Alvarez-Peters: Our biggest selling wines over the holiday season were Folie a Deux Menage à Trois and Veuve Clicquot, both in 750-ml. For spirits, it was Kirkland Signature Vodka in its 1.75-liter package, Crown Royal in 1.75-liter, and Baileys in 1-liter. In beer, it was Corona and Heineken, both in 24-packs.

SND: That’s interesting about Veuve Clicquot. How were Champagne sales overall?

Alvarez-Peters: Champagne sales were good. Allocations were tight on a few major brands, which gave us the opportunity to feature other Champagne houses.

SND: For wine, were there any notable trends by varietal type or region?

Alvarez-Peters: Sales in our fine wine category (over $11) grew by double-digits in the fourth quarter. Domestic Cabernet and Pinot Noir had strong increases, along with 2008 Bordeaux, Italy and Spain.

SND: How did spirits perform?

Alvarez-Peters: Spirits remained strong, especially the super-premium categories of whiskey and Scotch.

SND: Did you notice any changes in buying patterns in the last quarter of 2011?

Alvarez-Peters: With Christmas and New Years landing on a Sunday, it was a slower start than usual.

SND: How did the Kirkland brand perform for you in the fourth quarter, aside from the strong success with the vodka?

Alvarez-Peters: While Kirkland Signature Vodka (1.75-liter) was our number-one selling vodka in the fourth quarter, we were pleased with our Kirkland Signature 7-year-old Bourbon (1-liter). We had a limited run of Kirkland Signature Macallan 20-year-old single malt Scotch (750-ml.), which sold out very quickly. Also, a Kirkland Signature 2009 Bordeaux Superieur did extremely well. We had cost efficiencies, so we were able to lower our price on the Kirkland Signature Golden Margarita RTD and continue with double-digit growth. In addition, our members responded quite well to the new package and price reduction on the Kirkland Signature Añejo Tequila. In total, the units for our Kirkland Signature program for the fourth quarter grew at double-digits by value and single-digits by volume.

SND: Has the weakening euro impacted your strategy at all?

Alvarez-Peters: We’re definitely taking advantage of the weaker euro against the dollar for various Kirkland Signature items. We haven’t seen the euro’s weakness reflected in pricing yet, but I would suspect we may see that down the road.

SND: Any expansion plans for 2012? How many stores is Costco up to now?

Alvarez-Peters: Costco has a total of 598 stores (433 in the U.S. and Puerto Rico and 165 in seven foreign countries) and our membership continues to grow. We’ve already opened six new units this fiscal year (beginning September 1, 2012) and our total plan for fiscal 2012 is to open approximately 20 new units. Of course, wine, spirits and beer licenses vary by state.

 

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