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Interview: Annette Alvarez-Peters Of Costco

September 29, 2014

Beverage alcohol accounted for $3.1 billion of Costco’s sales total of $102.9 billion in its fiscal 2013 (September 2012-August 2013), with all three sectors showing healthy growth. Wine is leading the charge at 50% of beverage alcohol sales, with spirits taking 30% and beer 20%. SND recently caught up with Annette Alvarez-Peters, Costco’s assistant general merchandise manager for beverage alcohol, to get an update on trends at the retail giant.

SND: How has the beverage alcohol department been performing at Costco?

Alvarez-Peters: We’re quite pleased with the performance this fiscal year. We’re seeing our biggest gains in spirits and wine, and we’re trending above the industry. As expected, sales in Washington are challenging, due to onerous fees and taxes as well as very aggressive competition. But I would say our top markets still include Washington, as well as Wisconsin, Indiana, Illinois, California, Florida and Washington, D.C., to name a few.

SND: What buying trends are you seeing in stores?

Alvarez-Peters: Large-format beers and ciders are doing well. Vodka and whiskies also continue to do well. Our top spirits sellers are (Costco private label) Kirkland Signature American vodka ($13.99 a 1.75-liter), and Jack Daniel’s Tennessee whiskey ($29.99-$43.99 a 1.75-liter). High-end spirits, notably Johnnie Walker, are also doing well. This fiscal year we’ve sold a number of The Macallan 60-year-old ($16,000 a 750-ml.), The Macallan 62-year-old ($19,000 a 750-ml.), Johnnie Walker’s The John Walker ($2,700 a 750-ml.) and Rémy Martin Louis XIII Cognac ($5,300 a 750-ml.). We have a very affluent member base, which is a big reason we continue to grow the beverage alcohol department. Our members’ average age is 52 and average household income is $94,000, with more than 33% of our members making more than $100,000 annually. And we have a wide range of shoppers at Costco, from everyday casual drinkers to collectors.

SND: What wines are doing well?

Alvarez-Peters: Our Kirkland Signature Pinot Grigio is doing extremely well. We’re also still doing great with the rosé and Prosecco categories. The most successful imports are from the Rhône, Spain, Argentina and Bordeaux. In terms of price range, our top-selling wines under $10 include Ménage à Trois ($6.59-$8.99 a 750-ml.) and Kirkland Signature Cabernet Sauvignon ($7.99 a 1.5-liter). Above $10, sales are led by Kim Crawford Sauvignon Blanc ($10.39-$14.89 a 750-ml.) and La Crema Chardonnay ($12.99-$16.99 a 750-ml.).

SND: What are your latest trends in beer?

Alvarez-Peters: We’re having fun experimenting with the 750-ml. and 22-ounce-formats for beer. We try different breweries, and every market has a unique selection. Our biggest-selling beer brands are Corona Extra ($21.50-$29.89 for a 24-pack of 12-ounce bottles) and Heineken ($20.99-$29.99 for 24-pack of 12-ounce bottles).

SND: What are the future plans for the drinks department at Costco?

Alvarez-PetersWe’ll continue to capitalize on what’s hot in the marketplace, stay on top of trends and strive to match the company’s overall growth. And we’ll continue to expand. Today in the U.S., we operate 464 locations in 43 states as well as Washington, D.C. and Puerto Rico. Some 373 of those stores in 40 states sell wine, while 266 stores in 31 states sell spirits and 405 locations in 41 states sell beer. Costco will open 30 new units this fiscal year, with 17 of those in the United States and 13 internationally.


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