Costco toasts sales of wine and spirits

Consumers have raised their glasses to Costco Wholesale’s offering of Kirkland Signature-branded wine and spirits — sales have increased 46 percent over the past five years and continue to increase. But Costo executives are apparently surprised by the success of their private-branded booze, which many consumers believe is comparable to the top branded offerings.

Richard Galanti, chief financial officer for the Issaquah, Wash.-based warehouse club, said during a recent news conference with investors that “the wine and spirit thing has caught us off guard in a positive way.”

“What started as a few line items a number of years ago … we are actually receiving rewards on price points that nobody can match, [as well as gaining] trust in the brand,” Galanti said. “On the spirit side, we never thought we would be successful.”

Costco began selling wine under the Kirkland Signature brand in 2003 and spirits in 2007. Galanti called sales of wine and spirits a “double positive” because Costco is gaining the full-margin of the private brand and the brands are losing market share.

Galanti said the wine and spirits Kirkland brand “has substantial legs.”

“Having the brand loyalty certainly helps with membership and [members] wanting to come back to Costco,” he added.

Last week, Costco reported its third-quarter earnings for fiscal 2017, with sales increasing 8 percent and comp sales up 5 percent compared to the same time last year. Sales were $28.22 billion.

Galanti said Costco has increased its online offerings of Kirkland Signature groceries and consumable items.

“If you are in the mood for Wagyu center-cut New York Strip Steaks, we apparently have a great deal on four 12-ounce steaks for $499.99,” he added.

The steaks would probably go well with a glass of Costco house wine.