February 15, 2022
Kirkland Signature Brand Surpassed Costco’s 2021 Sales of $59 Billion fiscal year, up 13.4% year-over-year and accounting for 31% of the wholesale club’s total revenue. How did he get so big?
The size of the Kirkland brand exceeds all but a few giant CPGs – only Nestlé, Procter & Gamble, PepsiCo and Unilever appear larger – and it is by far the largest private CPG brand. Walmart in 2020 put its Great Value brand at just over $27 billion worldwide.
Costco formed the Kirkland brand in 1995 and quickly expanded it into categories ranging from diapers to toilet paper, tires, golf clubs, luggage, wines and roast chickens.
As noted in a recent CNN profile, one of the reasons for its size was the decision of Jim Sinegal, co-founder and CEO of Costco in the 90s, to focus on a single brand.
“Conventional wisdom said you had to have a different name for every class of product you had — à la Sears Roebuck with Kenmore appliances and DieHard batteries and Craftsman tools,” Mr. Sinegal said in 2019 during a speak for McDonough School of Business in Georgetown. “We looked at it and said, you know, we’re in so many countries and we have such a range of products, we’ll have a room full of lawyers doing nothing but trying to erase these names.”
From the outset, Costco’s second priority was to make Kirkland’s products “equal to or better than national brands,” while striving for comparative savings of at least 20%.
Costco was expanding into the UK in the early 1990s and Mr Sinegal saw many overseas chains succeed with higher quality house brands.
Costco usually gives a brand name supplier the option of making the cheaper version of Kirkland and often forms collaborations, such as Starbucks roasted Kirkland coffee beans or Kirkland Einstein Bros. bagels. It also dropped private label categories including cosmetics, soda and toothpaste, though national brands are performing significantly better. CFO of Costco richard Galanti said of Kirkland in a 2017 the wall street journal article, “We try to be agnostic about it. We try it like any other brand.
DISCUSSION QUESTIONS: What are the obvious and less obvious factors in Kirkland Signature’s success? What can other retailers learn or replicate from Costco’s Kirkland approach?
“With so many families struggling with crazy prices for almost everything they need today, it’s no wonder Costco and the Kirkland brand continue to grow.”