“We really dialed up our focus on the Member’s Mark brand,” Sam’s CEO John Furner said in October. The brand now makes up 27% of Sam’s sales. Three years ago, Sam’s pulled a page from Costco and consolidated all its private labels under the Member’s Mark banner. Walmart’s biggest brand winner has come from Sam’s. It also launched an in-house kitchen to test new flavors for house food brands. Walmart has recently added clothing lines like Terra & Sky and Time and Tru women’s clothing. Both of those companies share customers with Costco, Campbell said.Īmazon ( AMZN) has aggressively built out its assortment to widen its selection and gain leverage over big brands.Ĭostco ( COST) is facing renewed pressure from from Walmart ( WMT), which has invested in improving its brands and Member’s Mark from its Sam’s Club arm. Trader Joe’s also has a similar strategy to Costco. Rivals have taken note of Kirkland’s success, and Costco faces new competition from store brands.ĭiscount grocer Aldi is growing in the United States, and it relies heavily on its own brands. For example, when Costco changed Kirkland cashew jars from round to square in 2014, it was able to load more of them into trucks and on warehouse racks, according to Costco Connection.Ĭostco's secret weapon: Food courts and $1.50 hot dogs In addition, Kirkland helps Costco control supply chain costs. Shoppers are attracted to mundane Kirkland products, like toilet paper, cheap bottled water, and nuts, as well as stuff like golf balls and wine. Galanti also said Costco discontinued its Kirkland soda after realizing that “no one was looking for a third major cola out there.”īut mostly, Kirkland helps bolster Costco’s reputation for high-quality merchandise, Barclays’ Short explained. Kirkland had its share of misses in the past.Ĭostco pulled its Kirkland light beer this year after a tepid response. Rivals do not have similar warnings for a single brand, a sign of Costco’s reliance on the brand. In its annual securities filing, Costco warns investors that sales and profit margin would suffer if Kirkland “experiences a loss of member acceptance or confidence. Just like any branded item, any private label lives and dies based on how it performs.” Since Costco offers a limited selection of items, it has less room to make errors with the brand or sales will suffer.Ĭostco sells Kirkland Signature in everything from meat to golf balls. “I don’t think at the beginning of this process in the early 1990s we thought nearly a third of our business would be under this brand,” Galanti said.Īlthough Kirkland has been more successful than its competitors’ own brands, Costco’s strategy carries risks. In 1995, Costco ( COST) brought all of its private-label lines under Kirkland, which is named after the city that hosts Costco’s corporate headquarters: Kirkland, Washington. That’s not necessarily something you can say about many private labels.” “It is one of the reasons people go to Costco. “Kirkland is a brand in its own right,” said Karen Short, retail analyst at Barclays. The 24-year-old brand is a valuable asset for Costco that draws club members into its warehouses and spurs them to renew their $60 and $120 annual subscriptions.
But it’s a “huge deal to them” when a Kirkland product starts appearing at warehouses, Campbell said.Ĭostco has staked its name on Kirkland. Yet for brands, Kirkland products can threaten their sales and undermine pricing power.īrands are loath to stop selling their products at Costco since they rely so heavily on its customers.
“When a traditional brand is losing shelf space or market share, what do they do? They create a better value,” Costco Chief Financial Officer Richard Galanti said in an interview. And it has added its own coconut water and nut bars at discounts to Vita Coco and Kind Bar. Nutella-like hazelnut spread that could put pressure on Fererro. Courtesy CostcoĬostco also introduced Kirkland triple-blade razors last year after years of selling Gillette blades at higher prices. Kirkland's sales reached $40 billion last year. Costco introduced Kirkland Signature in 1995.
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