Racking up the wine sales

Costco, which serves an upscale clientele, is seeing especially strong growth in its fine wine sales

Posted: Tuesday, March 27, 2001

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

Particularly hot is fine wine -- sales are up 42 percent in the last year.

Based in the Seattle suburb of Issaquah, the chain -- with 350 outlets in 33 states, including Alaska, and overseas -- expects to do about $35 billion in total sales this year. About $500 million of that amount will be for wine, estimates David Andrew, director of wine for the giant wholesale warehouse club.

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

There are $600 bottles of French wine for sale at Costco warehouses. The company is also the nation's biggest retailer of Dom Perignon, champagne that goes for $93.99 a pop, and the largest buyer of Bordeaux in the country, Andrew said.

Costco's wine section is split into two parts -- the budget selections in cardboard boxes stacked on pallets, and fine wines from Washington, California, Oregon, France, Spain and Italy, appealingly displayed in wooden boxes.

"The consumer in America is trading up," Andrew said.

The director of wines is eager to take the intimidation factor out of wine buying.

When a Costco worker offers a tidbit of rosemary potato bread, dipped in olive oil and balsamic vinegar, Andrew is asked "What wine might go best with that?"


"You should drink what you like," he said. He doesn't put much store in food and wine pairings.

Costco's wide variety, rapid turnover in inventory and discount pricing may help encourage people to try new wines.

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.

And that absence of quantity discounts helps keep the playing field fairly level, said Will Wright, director of sales for Sunnyside, Wash.-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 said.

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 percent.

"They might not take a chance on it at full price," he said. At Costco, with a markup of usually 10 percent to 15 percent, they might.

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

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

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