Fine-Wine Sales Are a Big Deal at Costco

A Costco employee, clad in food-service worker white, offers a tidbit of rosemary potato bread, dipped in olive oil and balsamic vinegar. What wine might go best with that?

David Andrew, director of wine for the giant wholesale warehouse club, doesn’t put much store in food and wine pairings, but he amiably suggests a Beaujolais or a pinot noir.

“You should drink what you like,” he says.

Like everything here but the bite-size samples, wine--fine wine--is huge at Costco.

While it’s possible to buy those large 1.5-liter bottles of wine, along with 5-gallon buckets of peanut butter and 12-packs of paper towels, the real growth has been in fine wines, with sales up 42% in the last year, Andrew says.

Costco’s buying and selling power is enormous. Based in the Seattle suburb of Issaquah, the chain expects to do about $35 billion in total sales this year, with 350 warehouses in 33 states and seven countries.

Andrew estimates Costco will rack up close to $500 million in wine sales.

For comparison, Washington state liquor stores total liquor sales last year came to $480 million. Wine sales made up almost $36 million of that.

While warehouse shopping might have a distinctly down-market sound, Costco’s research shows that its members typically have an income twice the national average.

“They expect the best of everything, and they trust us that the price will be the best,” Andrew says.

There are $500 and $600 bottles of French wine for sale here. Costco is also the nation’s biggest retailer of Dom Perignon, champagne that goes for $93.99 a pop, and the biggest purchaser of Bordeaux in the country, he says.

“Americans love wine,” says Andrew, a native of Scotland, who picked wine grapes in France and learned the trade in London. “They walk up and down the aisle, but they don’t know what to buy.”

Costco’s wine section is split into two parts--the wine on the floor, for $10 or less, in cardboard boxes stacked on pallets, and fine wines from Washington, California, Oregon, France, Spain and Italy, appealingly displayed in wood, lay-down boxes.

“The consumer in America is trading up. They’re drinking better, but they’re drinking less,” says Andrew, who is halfway to his certification as a master of wine, a rare level of expertise in the field.

He is eager to take the intimidation factor out of wine buying, which is one of the reasons he rather frowns on food and wine pairings. Costco’s wide variety, rapid turnover in inventory and discount pricing may help encourage people to try new wines.

Even the $10-and-under bottles are good wines for their price range, he says.

“In Britain, we all drink like fish and we want it to be as cheap as possible,” Andrews says. “People in America are afraid of wines that are too cheap.”

In most parts of the United States, Costco’s buying power doesn’t bring it a lot of advantage in pricing because alcohol is so heavily regulated by government.

“Everyone pays the same price for Columbia Crest; we just sell it for a little less because our markup is less,” Andrew says.

And that absence of quantity discounts in the Northwest helps keep the playing field fairly level, says Will Wright, director of sales for Sunnyside-based Washington Hills Cellars, which does business with Costco.

“You can buy everything at Costco for cheaper, but you don’t have to buy six cases of wine to get that great price like you do with toilet paper,” he says.

Andrew and Costco’s regional wine buyers don’t buy bad wines, and ultimately it benefits the industry, Wright says.

“Costco has been a real driver in building brand recognition,” Wright says. “I’m a full Costco supporter. I like what they’re doing.”

Some Wineries Welcome Shot at New Customers

Wineries that have built a reputation on exclusivity sometimes won’t sell to warehouses, but Wright sees warehouse retailing as a way to find new customers.

A high-end wine such as Washington Hills’ Apex cabernet sauvignon might seem too big a risk for a first-time buyer at a store where the markup is 30%.

“They might not take a chance on it at full price,” he says. At Costco, with a markup of usually 10% to 15%, they might.

“We appreciate anybody that furnishes a market for wine to the public, and we’ve had some problems in the last few years as the big grocery store chains get larger and larger,” said Norm McKibben, a Walla Walla vintner and state wine commissioner.

“Some of them have restricted the wines they buy to the very large brands, and since California makes about 90% of volume, more California wine has been showing up on grocery store shelves.

“But Costco has been very good at putting a representative cross-section of wines on the shelf.”

There have been some smaller retail complaints about the corporate clout of Costco, but Wright believes there’s a trickle-down effect. When Costco runs out of its allocation of Apex cabernet, for example, a customer who’s tried it there and liked it, might go to a wine shop to get it again and pay the higher price.

Mark Millett, a clerk at Pete’s Wine Eastside in Bellevue, says Costco’s real advantage is access to limited supplies of wine.

“There are only so many ways to get highly allocated wine, and buying power is one of them,” he says.

But it’s restaurants that are the real competition for allocated wines, he says.

“They get first dibs. In the producers’ eyes, it’s more desirable to have their wine in a restaurant than a wine shop,” he says.

On the Net:

https://www.costco.com

https://www.washingtonwine.org

https://www.washingtonhills.com