Interview: Annette Alvarez-Peters On Costco’s Continuing Wine Dominance

Costco’s beverage alcohol manager reveals the chain’s best-selling wines, spirits and beers.

Originally posted on marketwatchmag.com

Annette Alvarez-PetersIn its most recent fiscal year ended August 30th, 2015, Costco Wholesale Corp. posted global sales of $113.67 billion, with wine, spirits and beer comprising $3.6 billion of that total. Wine sales alone reached $1.69 billion, up 47 percent from $1.25 billion in fiscal 2010. In the U.S. market, wine continues to drive sales, led by super-premium labels. Market Watch recently spoke with Annette Alvarez-Peters, Costco’s assistant general merchandise manager for beverage alcohol, to get an update on the chain’s progress.

MW: How do Costco’s total beverage alcohol sales break out by category?

Alvarez-Peters: Wine comprises nearly 50 percent of the total, followed by spirits in the high–20-percent range and beer in the low–20-percent range. We currently have 488 Costco stores in the United States and Puerto Rico, with a total of 412 wine licenses, 440 beer licenses and 302 spirits licenses.

MW: What price points in wine are especially hot?

Alvarez-Peters: Some of our top-performing labels are La Crema Pinot Noir ($17.49 to $17.99 a 750-ml. bottle), Erath Oregon Pinot Noir ($11.89 to $12.99) and Kim Crawford Sauvignon Blanc ($11.99to $13.99). In premium red blends, selections like Coppola Claret ($12.99 to $13.59), as well as entry-level labels Ménage à Trois ($7.39 to $8.69) and Apothic Red ($7.39 to $7.79) do well. Overall, we’re seeing good growth with imports from Bordeaux, the Southern Rhône and New Zealand. The super-premium rosé category continues to surge, thanks to brands like Gérard Bertrand, Whispering Angel ($22) and Château Miraval ($24.95). Domestic red blends are also strong, along with Pinot Noir from California and Oregon. In the sparkling category, Prosecco is healthy. Our Kirkland Signature Asolo DOCG Prosecco ($6.99) is our top sparkling wine.

MW: Is Costco still the nation’s largest wine retailer?

Alvarez-Peters: Our sales are currently outpacing the industry. According to our distributors, we’re ranked at the top for wine sales.

MW: How much of Costco’s beverage alcohol sales are in private label versus national brands? How has that skew changed over the past five years?

Alvarez-Peters: We’re just shy of 15 percent for the Kirkland Signature business, which has been in growth mode over the past few years. We’ve developed many Kirkland spirits items, including Kirkland Signature Canadian Whisky ($19.79 a 1.75-liter), Kirkland Signature Silver Tequila ($19.99) and Kirkland Signature Blended Scotch whisky ($19.99) to name a few. In domestic wine, we’ve added items like Kirkland Signature Old Vine Sonoma Zinfandel ($9.99 a 750-ml. bottle), and imports include our Kirkland Signature Chianti Classico Riserva ($8.69) and Kirkland Signature Rioja Reserva ($6.99). We’ll continue to review opportunities for Kirkland Signature, focusing on quality and value.

MW: What’s doing well in spirits?

Alvarez-Peters: Vodka and whisk(e)y are still strong. Kirkland Signature American vodka ($13.99 a 1.75-liter bottle) and Kirkland Signature French vodka ($19.99) still lead our vodka sales. All whiskies are doing well—Bourbon, American, Canadian, Irish and single malt Scotch. Super-premium and luxury spirits labels, such as Johnnie Walker Blue, are outperforming the spirits category. We also highlight various craft distilleries in local markets.

MW: How is beer doing, and which craft beers are particularly hot?

Alvarez-Peters: New craft breweries continue to pop up in every market. It’s exciting to see this growth. We have the ability to rotate new brands and styles in and out of our system quickly. In terms of trends, beer is very market-specific. California does well with a Stone Brewing variety pack or Ballast Point in various styles, for example, while Michigan does great with Bell’s Brewery.

MW: Do you have any specific innovation plans going forward?

Alvarez-Peters: In a few markets, we’re testing Google Express and Instacart in both food and sundries, which includes beverage alcohol and non-food items.

MW: You’ve launched online beverage alcohol sales overseas. Do you have any plans to do the same in the United States?

Alvarez-Peters: We don’t have any near-term plans for online drinks sales in the United States, but we’ll continue to evaluate it.

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