Update: Costco's 90-point wines

I exchanged emails with Annette Alvarez-Peters, Costco’s assistant general merchandise manager for wine, spirits and beer for the U.S. about my post last week -- the one that said that several vendors had told me that the only new wines Costco was buying had to retail for less than $15 and score 90 points or better.

Alvarez-Peters was unequivocal. (And, for the record, she only does interviews via email). Alvarez-Peters wrote, “Costco does not have a policy to only purchase 90 point wines.  As mentioned previously, there are times we ‘promote’ 90 point wines as a feature endcap or quad (4 pallet positions) to create excitement for the department.”

On the other hand, four people –- none of whom work for the same company –- all told me the same story, practically word for word, that Costco won’t consider new brands that don’t score 90 points and cost $15 or less. One represents a variety of major national brands, the second handles well-known national and imported wines, a third represents mostly imported wine, and the fourth does smaller domestic and imported brands. And, since the original post ran, a fifth person, who is reasonably important at a major distributor, told me the same thing.

I also want to make an important distinction between wines Costco currently carries and new wine brands that it may purchase. This is something, from comments I’ve seen about my original post, that not everyone understands. The 90-point policy, if it exists, doesn’t mean Costco is pulling out wines that didn’t score 90 points. It means that it isn’t going to add new wine brands that don’t score 90 points or that retail for more than $15.

After the jump, the emails that made up our interview:

June 3, 2009

To: Costco
From: Jeff Siegel 

I’m a wine writer in the Dallas area, and I’m working on a story about Costco’s wine buying policies. Would someone have 15 or 20 minutes on the phone this week to answer a few questions?

I’ve had several Costco vendors tell me that the company is only adding new wine SKUs if the wine will retail for $15 or less and if it scores 90 or more? Is this a company-wide policy?

Does it only apply to new SKUs, or does it apply to current SKUs as well?  What’s the thinking behind the policy? Are the three major wine scores (Enthusiast, Spectator, Advocate) the only ones used?

Thanks for your help.

June 4, 2009

To: Jeff Siegel
From: Annette Alvarez-Peters, Costco

Hello Jeff,

My name is Annette Alvarez-Peters, Assistant General Manager for wine, spirits and beer at Costco. I oversee the United States.

I saw the blurb on The Wine Curmudgeon the other day, the statement from the vendors is not true about Costco. We are not telling our suppliers or distributors that we are only looking for 90 pt. rated wines. Costco sells a wide range of price points from $6.99 to $699 (first growth Bordeaux), as we all know, not all wines have 90 pts or higher. There are times we "promote" 90 point wines as a feature endcap or quad (4 pallet positions) to create excitement for the department.

Our policy remains the same - finding great tasting wines at the best possible price for our members.

Should you have any additional questions, please do not hesitate to email me direct.

Best regards,

June 4, 2009

To: Annette Alvarez-Peters, Costco
From: Jeff Siegel 

I’d much prefer to do this on the phone. Is it a company policy to do it via email? I’m not trying to be difficult. I just want to understand what’s going on and be my accurate in my reporting. I’m a long-time free-lance journalist who does this for a living.

I’m also well acquainted with Costco and retailing, and have written about the company in the past -- both for wine and for other publications. Jim Sinegal may even remember me; I did a piece about the company for the American Airlines in-flight magazine several years ago (which I still get reprint requests for). I was very impressed by his Bill Russell autograph.

If we can’t do a phone interview, then I’d like to be clear on a couple of points:

1. Is there a 90-point, $15 guideline for adding new SKUs? I was told this doesn’t apply to current SKUs, but to SKUs the chain currently does not carry.

2. If there is no 90-point, $15 guideline, then why have four vendors – none of whom work for the same company -- told me there is? Each has said they have wines Costco didn’t buy in the Dallas market because they didn’t score 90 points. Two told me they understood that this was a national policy.

If you need anything else, let me know. Again, I’d prefer to do a phone interview. Thank you for your help.

June 5, 2009

To: Jeff Siegel
From: Annette Alvarez-Peters, Costco

Hi Jeff,

Thank you for your email.  I understand you prefer to speak live, but, I do my interviews via email, and can follow up for clarification live.

To answer your questions:

1.  As I mentioned in my last email, Costco does not have a policy to only purchase 90 point wines.  As mentioned previously, there are times we "promote" 90 point wines as a feature endcap or quad (4 pallet positions) to create excitement for the department.

2.  I cannot speak for the four vendors you spoke to, I can only speak to Costco's policy. Costco buyers taste and evaluate numerous wines every week.  Our policy remains the same - finding great tasting wines at the best possible price for our members.

I hope clarifies this situation.

Technorati Tags: Costco,wine scores,90-point wines

Comments

[Adam]

There is a fine line between company policy and buyer orientation. I can't speak to the efficacy of the vendor reports you are getting, but if you take a walk through your local Costco wine section, it's clear that there is a significant reliance on ratings to sell wine in the Costco low touch sales environment. I don't see too much problem with that. Doesn't every retailer want inventory that has 90+ point turbo power behind it?

A more difficult outcome for me to reconcile is selling current vintages with past vintage ratings, even when they are indicated as past vintages, which is really common in all Costcos. So in their low sales touch environment, they ought to have a warning sign that reads "past performance is not an indicator of future performance"....whether or not it is company policy or informal operating code to push wines that score(d) 90 points.

[Jeff Siegel]

I've never said that Costco couldn't do what it wanted to do. This is the United States, and the company can do whatever it wants. My point has always been that there is a better policy than this.

I'm curious. Why do you taker Costco's statement at face value, yet have doubts about the people I quote?

[Adam]

Jeff,

I don't dismiss the validity of your quotes and sources nor do I absolutely trust the email statements you published from Costco (note my recent post http://winezag.wordpress.com/2009/06/09/90-points-of-costco-wine/).

I do think it is possible that the company could maintain a buying posture that is fully discussed internally and never claim it as policy. It's semantics, but it happens all the time in companies defending necessary buy unpopular operating strategies.

Costco is a giant financial and consumer machine focused on driving equity value. And as you never claimed that they should not do what they want to or need to do, they will do whatever is necessary to maximize the square footage of retail space they are invested in.

I think your point was really that they ought to admit and be open about their policy so it can be critiqued for its merits and problems alike. Do I have that right?

[Jeff Siegel]

Thank you, Adam. That, as the experts say, is a cogent analysis: "critiqued for its merits and problems alike." I couldn't have put it better myself.

Costco, and Alvarez-Peters in particular, are hugely influential. One of the vendors I talked to for this post (and who was the sixth who told me that he was told 90-point wines only) said that Alvarez-Peters has been called the second most powerful person in the U.S. wine business, behind only Robert Parker.

So what Costco does influences what other retailers do, and I think that this kind of reliance on scores -- if it exists -- doesn't help wine in the long run. It helps Costco during the recession, but if the idea is to educate consumers about wine, it's short-sighted. But, as you note, it isn't Costco's job to educate consumers about wine. It's to sell lots of wine.

[Tish]

Nice follow-up, Jeff. Moving forward, this specific incident may fade, but the issue of how the retail level of the wine trade uses and abuses ratings will continue. And that is a good thing, as it will raise awareness about just how people can better find wines they will like.

[Dennis Schaefer]

Ranting on the same story, with links to your site, I found it odd that Wine Spectator editor Tom Matthews would get fired up enough about the subject to post a comment on my site.

http://www.examiner.com/x-11305-Kansas-City-Wine-Examiner~y2009m6d11-Wines-at-Costco-Going-for-the-big-scores

[Jeff Siegel]

Hard to believe, Dennis. Thanks for the link to my item.

[Ed Tausk]

how about just ignoring this whole ridiculous point business. Does anyone force you with a pistol to buy a 90+ wine?
Ed

[Jeff Siegel]

The issue is not that I'm forced to use scores to buy wine. The issue is that too many people -- most people -- think that's how they're supposed to buy wine. All we're trying to do is to educate them to taste the wine and trust their palate, and not someone else's.

[wine online]

Agreed. Reviews may be used as a point of reference but shouldn't be the sole determinant. These are subject to perspective which may be similar or different to yours.