Costco and its role in the wine business

CNBC, the cable network, is running a documentary later this week about what it calls “The Costco Craze: Inside the Warehouse Giant.” Part of this is a very quick look at the role Costco plays in the wine business as the largest importer of high-end French wine in the U.S. and as perhaps the largest wine retailer in the world.

The clip, which is after the jump, is revealing if only for the interview with Annette Alvarez-Peters, who oversees Costco’s wine buying — and rarely gives interviews. It’s not long, only a couple of minutes, but worthwhile for Alvarez-Peters’ reaction when reporter Carl Quintanilla asks her if she is the most powerful person in the wine world.
It’s a fair question, but one that the documentary never really answers (based on the pre-release clip and links I was sent). Why a fair question? Because Costco’s pricing power is immense. When it enters a market, other wine retailers have to match its prices or lose sales. Talk to anyone who sells or distributes wine, and this makes them crazy. On some popular brands, Costco can sell wine for about the same price that it costs other retailers to buy wholesale.

I saw this most forcefully when I was in a liquor store in Anchorage, Alaska, several years ago. Many of the prices were lower than they were in Dallas, and I asked the salesman how that could be, given the high cost of living in Anchorage, the extra transportation costs, and the like. He sighed and said, “Costco.” At the time, Anchorage had a Costco and Dallas didn’t.

This is a subject worthy of serious reporting, but I’m not sure CNBC does it justice. As the wine world changes over the next decade, and the importance of critics like Robert Parker wanes, power may well shift to trusted retailers like Costco, Trader Joe’s, and Whole Foods. These retailers will be able to set the consumer wine agenda in much the way that critics like Parker did, something that has happened already with Two-buck Chuck, a wine invented for Trader Joe’s that gets middling reviews but elicits almost cult-like devotion. The experts I have talked to say this could happen more and more.

Which would certainly make someone like Alvarez-Peters, who decides what wines get in that trusted retailer, the most important person in the wine business.

3 thoughts on “Costco and its role in the wine business

  • By Noblewines -

    Another great insight into what’s really going on in the wine industry.
    I am rooting for the consumer to become most important through technology and crowd-sourced wine critics. Time will tell.

  • By Jeff -

    I’m a member at both Costco and Sam’s. Now, it might just be me, but I’m of the opinion that Costco’s buyers are far more educated than those at Sam’s. I have been introduced to several well-made inexpensive wines at Costco. Glad you posted this. I’ve always wondered the “who and how” of their buying.

  • By Mike Kaufher -

    Speaking of pricing, what is Costco’s pricing formula to the winery?

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