Interview: Costco's Beverage Alcohol

Chief Chad Sokol

Off-premise growth was robust across the drinks business last year, and the situation at top beverage alcohol retailer Costco was no exception, as revenue jumped 20% in calendar 2020. Total annual beverage alcohol revenues at Costco are now estimated at approximately $5.5 billion. The retail giant has licenses to sell spirits in 337 locations in the U.S., wine in 455 locations, and beer in 496 locations, plus 177 beer/wine licenses and 156 spirits licenses in international markets. SND executive editor Daniel Marsteller recently caught up with Chad Sokol, Costco's assistant vice president-general merchandise manager for beverage alcohol, to discuss business trends and the company's plans for 2021.

SND: How are overall conditions for Costco's beverage alcohol business?

Sokol: We've been very fortunate to have sustained strong growth rates across all of our categories this past year, and our suppliers and distributors have done a great job in keeping inventory up in most areas as best as possible. As we begin to anniversary on early Covid trends from last year, we're hoping to still maintain strong sales going forward and feel fairly optimistic about 2021.

SND: Which U.S. markets are performing best within Costco's beverage alcohol business? Are any regions particularly challenged at the moment?

Sokol: We're seeing similarly strong growth rates across all regions with the exception of states with increased lockdown measures such as California, or states like Hawaii that are suffering due to lack of tourism. Those areas are still showing growth, but at a slightly lower rate than other regions.

SND: Which wines are performing best at Costco lately, and where within the wine category do you see growth potential for the future?

Sokol: We've seen members trading up in price points along with strong growth in our Kirkland Signature wines at all price points. We're redesigning many of our wine labels and focusing on new partnerships that will be coming out over the next few months that we hope will keep the excitement going. We've also been focusing on developing new relationships with suppliers and wineries that were previously hesitant to place their wines at Costco, and our members are very happy to see these offerings made available.

SND: What trends and products are driving the spirits side of the business currently?

Sokol: We're seeing generally the same trends as retailers have reported across the country, including strong growth in Tequila, more premium spirits, and RTDs.

SND: What trends stand out on the beer side?

Sokol: Beer has been all about hard seltzer and craft beers this past year.

SND: What changes in the business have you seen since the start of Covid, and do you expect any permanent shifts to endure as the pandemic recedes?

Sokol: At the start of Covid, like many others, we saw consumers trading down on price points, especially in the sparkling wine category. But as we moved through summer, prosecco and Champagne really came back strong as people were willing to spend more to have a great experience at home. RTDs have been growing and I would suspect that even as the on-premise begins to reopen that sales will remain strong in this category.

SND: What are your plans for the beverage alcohol department looking into the future?

Sokol: Our buyers are really focusing on keeping the newness and excitement going. We're largely a rotational business and items that were planned for an 8-12 week rotation have been selling through much quicker than that, which is great for our members, because our goal is to always have new items available each time they come in. Our Kirkland Signature items have also been growing at a very strong rate and we're working on many new items and projects that will be coming this year.

Southern Glazer’s Wine & Spirits Purchases Bill

Foley’s Epic Wines & Spirits

In case you missed yesterday’s News Alert, Southern Glazer’s Wine & Spirits has purchased Epic Wines & Spirits from wine magnate and NHL owner Bill Foley. Terms of the deal weren’t disclosed, and the transaction is subject to standard closing conditions. As part of the deal, SGWS will become the national distributor for Foley Family Wines. Here’s the full story.

Wine Spectator: Constellation Brands Prevails in To

Kalon Dispute

Can you trademark terroir? In the case of Napa's most famous vineyard, a federal court has ruled yes. U.S. District Judge Yvonne Gonzalez Rogers has ruled in favor of Constellation Brands in a suit filed by Jeremy Nickel, owner of The Vineyard House, dismissing his claim that he is entitled to use the To Kalon Vineyard name on his wines based on the location of his Oakville winery and vineyards.

Following a virtual trial, Gonzalez Rogers issued a ruling January 26 that Nickel did not paint a clear picture of whether his land was once used by Hamilton Walker Crabb for grapegrowing and was considered part of the original To Kalon Vineyard. She found that evidence was weak that Nickel's land, once called “the Baldridge Property,” had been planted with vines during Crabb's lifetime.

Reviewing probate records from just after Crabb's death, the judge wrote, “The evidence overwhelmingly confirms that [Crabb] did not [plant a vineyard on the Baldridge property], at least not with any commercial value.” Wine Spectator the full story.

News Briefs:

•Aventura, Florida-based 1821 Fine Wine & Spirits has added Argentine winery Proemio to its U.S. distribution portfolio. Proemio’s wines are priced from $15-$50 and cover single varietal wines like Malbec, Chardonnay, and Cabernet Sauvignon (available in the company’s Origins and Reserve tiers); the winery also produces a red blend ($16) and the Icon and Gran Reserva blends ($50 and $40, respectively), among other wines. 1821 Fine Wine & Spirits is the U.S.-based subsidiary of the Zonin, the Italian wine company with brands from Italy, Chile, and California, among other wine-producing countries.

•Brown-Forman’s the Benriach has launched a new series of luxury-priced Scotch whiskies. First up is the Benriach 21-year-old, a 46% abv whisky matured in a combination of ex-Bourbon, Sherry, new oak, and red wine casks that retails for $200. The company has also launched a 25-year-old whisky aged in Bourbon, Sherry, new oak, and Madeira casks ($360); and a 30-year-old whisky that retails for $740 and matured in Bourbon, Sherry, new oak, and Port casks. The new whiskies are rolling out now in limited quantities.

•Casa Komos Beverage Group has announced Tequila Komos Reposado Rosa, the latest agave spirit in the brand’s portfolio. The Tequila is aged in once-used red wine barrels that impart a rosé color to the spirit, which is packaged in porcelain bottles. Reposado Rosa will launch in May. Casa Komos Beverage Group was founded in 2019 by drinks industry veteran Richard Betts and Joe Marchese, and currently markets the Superbird RTD and Komos Tequila brands.