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.