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The secret to Costco’s wonderfully cheap booze

Screenshot: Leaving Las Vegas
Screenshot: Leaving Las Vegas

Despite falling short of its overall projections this holiday season, wholesale warehouse chain and purveyor of everything in bulk Costco has been kept afloat recently by its booming alcohol sales, with particular thanks to its basement-price Kirkland Signature-branded liquor. Given the growing success of the in-house brand, a recent article from Bloomberg attempted to answer the question asked by every broke 22-year-old triumphantly holding up a 1.75L bottle of Kirkland vodka: How is this booze so damn cheap?

The answer, as it turns out, is fairly simple. When it comes to its signature label, Costco has put an emphasis on increasing quality while lowering its markup. The industry standard for alcohol is about a 25 to 45 percent markup depending on how premium the liquor is. But Costco’s entire brand is built around providing the best value for its customer, so the company routinely tacks on only 10 to 14 percent to Kirkland-branded alcohols. The result is an incredibly affordable product that people enjoy enough to come back to again and again.

“Private label continues to grow as a dominant strategy in retail—especially when it migrates from being a ‘label’ to more of ‘brand,’ which Kirkland has done,” consultant David Bassuk told Bloomberg. “Now it’s a well-known name that gives the consumer a perception of value and a good deal.” This is, of course, just some industry jargon that means “gets you shit-housed for under $20.”

It seems the only thing stopping Costco from being the number one name in the booze game are the particulars of alcohol laws in the various states, which keep the wholesaler from selling beer and wine in 20 percent of its stores and spirits in 40 percent of them. But if you’re one of the lucky club members who can get your hands on the goods, raise a glass of Kirkland’s finest and then raise another five, because damn is it cheap.

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