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Costco Convinces Brands to Cannibalize Themselves

84 points by elsewhen 6y ago

Apocryphon 6y ago
Great topic to focus on. It's often said that Kirkland vodka is Grey Goose, didn't know that about other products. Costco seems to have a unique position among modern big box chains for having a good reputation on ethical issues like worker's compensation (at least pre-pandemic), and this seemingly agreeable business relationship with brands is another example.
- paulie_a 6y ago
  Rumor had it their enamaled iron cookware is la cruset. I have a Dutch oven that was 60 dollars vs the 200+. I'm willing to bet it's true because I can't really name another french cookware company specializing in that sort of goods.
  - alexwasserman 6y ago
    https://www.zwilling.com/us/staub/ https://www.zwilling.com/us/staub/ https://www.emilehenryusa.com/ https://www.emilehenryusa.com/ No idea which Costco uses, but Le Creuset is definitely not the only French enameled cast iron manufacturer.
  - asquabventured 6y ago
    Staub is another French cookware company that makes enameled cast iron. Great stuff, probably even slightly nicer than Le Creuset.
- gthtjtkt 6y ago
  Grey Goose is one of the worst vodkas on the planet according to most blind taste tests.
  - otterley 6y ago
    Pepsi consistently wins blind taste tests against Coca-Cola, and yet the latter has a much larger market share. It’s a textbook proof of the power of marketing.
    - pfranz 6y ago
      I think soda's popularity is proof of the power of marketing. The "sip test" was thought to be flawed because taking a sip of something is completely different than drinking a glass of something. New Coke might be a better example since supposedly it was formlated to beat Pepsi in the sip test but failed miserably in the market.
  - goldenkey 6y ago
    I am an actual vodka drinker and disagree. Grey Goose is actually really good vodka. And let's be clear, you cannot just group all vodka into one category. There is potato vodka, wheat vodka, rye vodka, and even other grain (and fruit!) types. Belvedere is one of the most expensive vodkas yet has a somewhat particular taste due to being rye vodka. It's not my favorite but I appreciate it for its unique characteristic..rye vodka has an interesting and wonderfully complex taste. Rye whiskey is quite nice too. Contrary to common perception, a good vodka isn't supposed to be tasteless - grain neutral spirit does not mean tasteless. It's called a spirit because even after the triple distillation, the "spirit" of the grain would still remain. And not every one is going to agree on which vodka tastes best because it's the same as if I tried to find the best flavor of ice cream. More important than preference for taste, good vodka has more distillation, less impurities, and thus leaves less of a hangover due to less tax on the liver and other organs. If you actually want a tasteless vodka you can buy what is termed an ENS, Extra Neutral Spirit. [1,2] Spirytus Wesoly is a very high quality ENS that sells for around $15 a liter. It is a potato vodka made in Poland, 192 proof 96% ethanol. The remaining 4% percent is almost entirely distilled water. Similar American-made Everclear is 190 proof 95% ethanol produced from corn. In constrast, unlike our Polish competitor, Everclear is sweet, sticky, and has a hint of sickly corn syrup in its taste profile. That 1% difference combined with the choice of a sweet corn versus starchy potatoes, makes for a vastly inferior product. But corn is subsidized in the U.S, so it makes sense from a business standpoint. If you wish to drink a 96% vodka without causing internal chemical burns, add some filtered water to dilute it to around 30%-40% ethanol. You should notice no grain taste at all - truly neutral. But not very enjoyable, at least in my opinion. It lacks character, rather hollow. Economical though..and has a range of other uses. I personally use it as a thinning agent in my custom e-liquid/vape-juice recipe that consists of about 20% ethanol, 70% vegetable glycerin, and 10% distilled water by volume. I also have it for use in making hand sanitizer and as a safe wound disinfectant. I wrote a blog post [3] a while ago on how methanol and other alcohols can seep through skin and poison one's body. This is why, aside from ethical reasons, I no longer use deodorants like Old Space Classic, that are formulated with methanol aka denatured alcohol aka wood alcohol. Methanol isn't suitable for food or beverages, making it a cheap industrial chemical, a convenient substitute for ethanol if health is disregarded. Methanol and other alcohols like isopropyl get converted by the liver into formaldehyde and acetone respectively, among other toxic metabolites. Over time, if one continues to use methanol based cosmetics, they are effectively mini/micro dosing a toxin daily, by transdermal means. [4] Sure, for most cosmetics, whether it be hair spray, lotion, or deodorant, it is a rather small dose of methanol, but why consume toxins even in small amounts, if avoidable? The big businesses like P&G are just doing it to make even more profit at the possible expense of your health. Toms of Maine on the other hand, uses ethanol because they actually don't roll dice with their consumer's health. Big biz is always playing shell games with risk reward balances. It's death by 1000 paper cuts corporate directing. For the same reasons, I highly suggest buying an ENS like Spirytus for use in your medicine cabinet in lieu of isopropyl which metabolizes into acetone. $15 for a liter of alcohol is actually not much more expensive than the price per volume for those plastic bottles of isopropyl. Mind you, HDPE (High Density Polyethylene) is chemical resistant, but lower density plastics, typically the more flexible kind, are vulnerable to reaction with strong solvents, acids or bases. Spirytus is sold in a glass bottle, entirely inert. Anyways, there's so many things wrong with the average risk most of us don't even know we've been subjected to. I think I've sold you on pure ethanol by now.. Hope you understand why vodka is made and marketed the way it is... [1] https://en.wikipedia.org/wiki/Rectified_spirit https://en.wikipedia.org/wiki/Rectified_spirit [2] https://www.ethimex.com/blog/2019/07/22/the-complete-guide-to-neutral-spirits-for-beverages/ https://www.ethimex.com/blog/2019/07/22/the-complete-guide-t... [3] https://churchofthought.org/blog/2020/04/25/cruelty-free-deodorant/ https://churchofthought.org/blog/2020/04/25/cruelty-free-deo... [4] https://www.fda.gov/drugs/drug-safety-and-availability/fda-updates-hand-sanitizers-methanol https://www.fda.gov/drugs/drug-safety-and-availability/fda-u...
ineedasername 6y ago
I stopped going to Costco when I realized 1) I couldn't get a parking space without 10 minutes of driving around looking and waiting for someone to pull out. 2) I couldn't pay for my items without waiting on line for 10 to 15 minutes and 3) Most items are a little bit to a lot cheaper at normal supermarkets if you wait for a sale and stock up. Costco has some unique frozen foods I like, and good prices on some fresh meat, but #3 above meant it was rarely worth going for more than 2 or 3 items, and #1 & #2 above meant it would always be a much bigger hassle than 5 minutes at the normal grocery store. Although I fully recognize that the above times are probably highly dependent on the setup & how busy my local Costco stores are. If I could get in and out of Costco as quickly as the grocery store (I drive by both on my commute home) I'd still have a Costco membership.
- crooked-v 6y ago
  The real value of a Costco membership is in the ancillary non-grocery stuff, like cheap glasses and contacts, discounts off high-end electronics, money back on plane tickets and rental cars, etc.
  - timeinput 6y ago
    Yeah the PS4 and XBox gift cards tend to justify the membership cost on their own for me, so everything else feels like a bonus, and I don't feel bad about wasting money buying something somewhere else even if it's a bit more expensive since the Costco membership is already paid for.
    - voltagex_ 6y ago
      Huh. I think we get 10-15% off iTunes cards sometimes, but not Xbox. I would say the bifurcation into Gamepass vs Xbox Gold may reduce the value of any discount, though.
      - timeinput 6y ago
        It's been quite a while since I last used the deal since I've not been in the store. I think the last time I used it was something like $80 for $100 in playstation store gift cards, but I think I'm more used to the 10% off as the general rule for their gift cards. ETA: I just checked online and they're only 10% off (both Xbox and PS).
luhn 6y ago
Isn’t it pretty common for food manufacturers to white label their product for generic brands? IIRC this is hardly specific to Costco/Kirkland.
- mark-r 6y ago
  The difference is that other white label brands aren't expected to maintain or increase the quality from the name brand. It isn't unusual for white brands to be absolute trash in comparison. I have a friend who refuses to buy the Target store brands because he's been burned so often.
  - deleted 6y ago
    [deleted]
  - Azurin 6y ago
    Target brand is trash, Safeway brand is trash, and WholeFood's 365 is trash (also other wholefoods brands but I haven't verified those)
- skwb 6y ago
  Yeah, I thought Trader Joe's did this a lot also? I recall they're super secretive of what items they buy directly from name branded stores, and people have spent serious time trying to reverse engineer their supply chain. https://www.eater.com/2017/8/9/16099028/trader-joes-products https://www.eater.com/2017/8/9/16099028/trader-joes-products
  - blaser-waffle 6y ago
    Yeah but Trader Joe's are often 1) higher end food (e.g. lobster bisque), or 2) quality basic foods. Same basic value proposition as Kirkland -- not name brand but consistently good quality.
- cosmie 6y ago
  Yes and no. Manufacturing can take many forms: 1. Manufacturers that only produce private label products for others, and have no consumer brands of their own. 2. Manufacturers that only produce branded products, and (for either operational or strategic concerns) does not produce private label products. 3. Manufacturers that, either intentionally or incidentally, have spare capacity and are wiling to use it for private label production. Mars Petcare is a good case study of all three[1]. They used to call into the third category and had several plants dedicated entirely to private label production. But for strategic reasons sold off their private label division and now fall into the second category, while the investment firm that bought those assets created a new company from them that falls into the first category. There's also a variant of #2: private label brands that do their own manufacturing. Krogers is an example of this - they outsource a number of their SKUs to other manufacturers, but they also operate at least 38 manufacturing plants themselves (figure from 2018)[2]. For manufacturers that do both branded and private label production, the situation isn't as clear cut as relabeling the same product: - Private label is an optimization, not a goal. For sufficiently large or mature manufacturers, this can mean your brand production runs happen on your state of the art production line or at your brand new facility, while your private label runs get the old stuff. This can create distinct differences in both the quality and capabilities of your branded vs. private label production. It can also mean you strategically reserve certain capabilities or innovations for your branded products, and don't make them available for private label clients. - Private label buyers rely on your product expertise and production capabilities, but not the opinions of your brand management team, which may ultimately result in a wildly different set of product requirements and eventual bill of materials. For example, just think about the different optimization goals between a private labeled product for Whole Foods vs. Dollar General. The same manufacturer may produce both, but they may look roughly similar, but the bill of material (and price point) may be wildly different as Dollar General consumers expect their prices to be low above all else while Whole Foods consumers are willing to stomach higher prices but also have higher expectations around the ingredients/materials that go into the product. And the same manufacturer making both of those may have a branded product of their own, which has to fit the image/expectations of their brand while being suitable for consumers at all of the retailers that stock their product. What's notable about Costco/Kirkland is that their set of requirements pretty much dictate that you have to treat the Kirkland product as a first-class citizen along with your own branded products. You can't hold back production capabilities solely for your own branded products, nor under-invest in the equipment/facilities that produce it. The "15-20% cheaper and 1% better in some metric of their choosing" aspect that's referenced in the article is less unique to Costco. That's likely the typical type of optimizations private label buyers request, a specific price point they know their consumers expect it to be and a product change that optimizes it by a metric valued by their particular consumer base. [1] https://www.foodbusinessnews.net/articles/12512-mars-petcare-exiting-private-label-business-in-the-us https://www.foodbusinessnews.net/articles/12512-mars-petcare... [2] https://storebrands.com/kroger-manufacturing-it-takes-village https://storebrands.com/kroger-manufacturing-it-takes-villag...
adrianmonk 6y ago
I don't understand the section on how the economics work. This French vodka maker doesn't quit selling vodka under their own brand. They just also sell some as Kirkland. So don't they have to keep doing a bunch of marketing so that their brand-name vodka keeps selling in all the other stores? How do they save any money on marketing? I would guess the real reason it works is that it opens up a market of people who wouldn't buy name-brand vodka at (say) $29.99/bottle but will buy Kirkland vodka at $19.99/bottle, yet without cannibalizing their ability to keep selling it (in other stores and in Costco) to people who are currently paying $29.99. Or another theory is that many Costco buyers aren't vodka experts, so there is some degree of randomness to how they pick vodka. If there are 10 brands of vodka, selling under the Kirkland brand and their own means they are 2 of the 10 brands instead of 1 of the 10, so to the extent that people pick randomly, they get picked twice as often. (It's like buying two raffle tickets.) A similar effect would apply to people who cycle through brands of vodka.
- Skunkleton 6y ago
  Also if company A is unwilling to supply a white label version, then perhaps company b will instead. Better to make money selling a white label then not make money because you didn’t.
- kevindong 6y ago
  The tl;dr; is that some profit is better than no profit (selling the white labeled money garners some profit vs. no profit if the manufacturer decides to not do the white labeling). The lower profit margins is made up for by higher volume.
- megablast 6y ago
  He is working out marketing costs per item sold. The marketing costs for the white brand is almost 0, since Costco does it.
  - adrianmonk 6y ago
    Yeah, that must be what the article means to say. I think I was just stuck on phrasing like "brands don’t have to spend nearly as much money on marketing". I'm not sure I'm convinced that per-unit is a great way to analyze marketing costs since if you air a TV ad, it reaches a segment, so to me it seems more like an annual cost or something. But I do get what it's saying now.
zozin 6y ago
Costco holds a special place in my heart. Even though I'm single I still get most of my groceries there. I've been going to the same two locations for +3 years and I've seen very little employee turnover; the employees seem genuinely happy to work there, as opposed to other big box retailers such as Target or Wal-Mart, whose employees are often lackadaisical or barely out of training. I haven't had 100% success with all of their products, but the vast majority of the time I do not regret my purchase. I know that I'm getting a solid (if not stellar) product in that segment, as opposed to, say, Amazon, which in 2020 is basically making me pay $120 for Prime for the chance to play Russian roulette with their products, even the name brand ones. I will probably cancel Prime since it encourages unnecessary consumerism (at least it does for me) and the price has gone up 200% since my student discount is no longer applicable. Long live Costco! :p
- dhosek 6y ago
  Costco has a reputation for treating their employees very well with good pay and benefits. Overall, they have chosen not to prioritize profit above all else, and it ends up having ancillary benefits. I've noticed during the pandemic that the quality of the shopping experience seems to correlate very much with how the company treats their employees. A shopping trip to Costco or Trader Joe's is generally pretty stress-free. Whole Foods not as much (I attribute this at least partially to Amazon policies—even pre-pandemic, there was a notable difference in the experience of shopping at WF after Amazon took over). Going to Jewel is almost always a nightmare.
- Cerium 6y ago
  Costco is near and dear to me too. Curated shopping with a promise not to cheat you creates an exceptionally relaxing shopping experience. Regarding their employees, one of my best friends has been working there for about 8 years now and continues to enjoy it. Costco has a very high yearly employee retention rate (around 95% as I remember).
- throwawaysea 6y ago
  I’ve had a sort of revival of local shopping (at Costco and other places), even more so during COVID, since I value their presence and role as a social shared space. I am also cooking more, reading more, and spending more time outside. These changes have had me considering cancelling Prime as well, especially with recognizing the low return consumerism has for happiness and health compared to the simple things. In the same way, I feel like streaming services have resulted in a “digital consumerism” and I’m considering cancelling some of them as well.
mmmpetrichor 6y ago
It's a good story, but the whole premise seems to be based on a couple of anonymous reddit comments..
- dhosek 6y ago
  I've seen similar things reported in other venues that weren't sourced from reddit.
mark-r 6y ago
Costco has done a fantastic job of product selection. I've never been unhappy with anything I've bought there. If it's on the shelves, I'm going to trust that it's a decent quality for the price, no matter what brand is on the label. That consistency is key to making the private brand strategy work.
pravda 6y ago
Are we sure this is not a Submarine (PR-placed) article? "In a normal Costco purchasing example, a company might sell their product for $0.95 and Costco might retail it for $1.00. This would result in a 5% margin (in reality the margin is a bit lower, but let’s use these numbers for estimates)." That just rings really false to me.
- mdorazio 6y ago
  They actually list their margins in their normal SEC filings. For merchandise it's usually around 11% on average. Obviously it will be higher or lower than that for specific products. Costco is able to have margins way lower than retail average (Target runs around 28% for comparison) by having much lower per-revenue dollar operating costs and by doing an absolutely stupid amount of revenue per location (a single location will average close to $200M in sales per year).
  - jmchuster 6y ago
    14% markup on Kirkland Signature and 8-10% on everything else.
  - Animats 6y ago
    Costco has been annoying the drugstore industry by marking up the drug section at the same markup as the rest of the store. Markups at CVS, etc. are much higher. Costco has a smaller selection and only sells the big sizes, so it works out well for them.
- parliament32 6y ago
  https://investor.costco.com/node/22121/html https://investor.costco.com/node/22121/html Page 28, gross margins are around 11%.
- blaser-waffle 6y ago
  Just cuz it is a submarine -- god knows like 30% of the internet these days is subtle marketing -- doesn't mean the stats are fake. Costco is able to go toe-to-toe with Walmart and Amazon for a reason: they have the margins. And as another poster mentioned, they're a publicly traded company with SEC filings that discuss revenue, costs, and other details; we can check those numbers.
jb775 6y ago
The one thing about Costco that's annoying is how they double check your receipt on the way out and kind-of make you feel like a criminal that can't be trusted.
- Consultant32452 6y ago
  In most (every?) states it's illegal for them to force you to stop. I don't have a Costco membership, but some other stores around here pull the same stuff sometimes. I just politely tell the person, "No thanks" and keep walking. With Costco you risk them canceling your membership, so take that path with that risk in mind.
- Fezzik 6y ago
  I find it nice that they do it - one of the things they check for is items that you purchase via cardboard card (laptops, gift cards, gym memberships, etc...). I'm always surprised that people find it so offensive that someone is double checking that you got all your items while double checking that you aren't stealing. I've never once felt like a criminal. Proud member since 2001.
  - kevin_thibedeau 6y ago
    They're checking for theft no matter what they claim.
    - blaser-waffle 6y ago
      For sure. But they're checking everyone, and mostly for optics. They're not singling you out, and it's not like waiting in line for 45 minutes for the TSA to frisk you. And most of the time they're not even checking, just looking for obviously sketchy low-hanging-fruit and spooking the half-hearted crooks.
- jmchuster 6y ago
  Well, yes, that's the intent. That combined with their members-only policy results in significantly reduced shrinkage, which further allows them to drive down operating costs and thus prices.
niftich 6y ago
Okay, sure, but Costco's real strength isn't people's abstract trust in the quality of the Kirkland brand, but the fact that there's (1) heavy curation, leaving very little selection, which limits consumer indecision and raises the stakes for suppliers; and (2) an extremely accommodating return policy, so you can truly rest assured that you're made whole. Lots of other stores have a money-back guarantee on their private label stuff, but are you really going to return a bag of $2 chips to a grocery store? But you've probably returned some big-price item to Costco before, so you likely have experience with the process. And when your purchase is closer to fifteen bucks instead of $2, you're a lot more likely to want the satisfaction guarantee. Costco gives you that, and you know in your heart that you're likely to actually use it if the item really doesn't work for you. As for curation and selection, there's no more than two choices at Costco for every product category. Instead of buyers checking every shelf and variety and sizing of 6 different brands of the same thing before they buy, they make only two binary choices: Do I need this? Do I want the cheaper one? Conversely, this means that your manufacturer's coupons, your rotating sales, your TV spots are all practically useless for tipping this market segment your way. As a producer, only way in to this near-captive market is to already be the leader, or to agree to make the Kirkland. Wouldn't you rather try than to be shut out?
- xenihn 6y ago
  I once left a $60 item in my cart in the Costco parking lot. It was a lot to me at the time because I was still unemployed after college. I didn't realize I had left it until I got home. I went back to Costco and looked around in the parking lot to see if I could find it, then I went inside to ask if someone had brought it in. I asked if they could refund it so I could immediately buy another one, and they let me. I don't think any other store would have allowed that. I'm now a high-earning adult who regularly goes to Costco with the original intent of buying two items, and leaving with a $200-$400 receipt. I know it's kind of pathetic, but spending money at Costco makes me really happy. I've spent an average of $5000 a year at Costco since I started working in tech. Easy to remember since I get roughly $100 back every year from the 2% on the Executive card. I've only returned like five products total ever, and none of them were pricy. I'm going to be sad when Costco starts to suck. It can't last forever.
wink 6y ago
Never been to the US or Costco, so can't comment on the quality there. But no matter how your international impression of Aldi and Lidl is, in Germany a few (or a lot) of their products are exactly that, rebranded versions of stuff that would cost 50% more if it had the original packaging, in another supermarket.
- graton 6y ago
  The US now has Aldi and Trader Joe's here. One is owned by Aldi North and one is owned by Aldi South. I forget which is which. Trader Joe's is well know for their store branded food items.

84 points by elsewhen 6y ago

Great topic to focus on. It's often said that Kirkland vodka is Grey Goose, didn't know that about other products. Costco seems to have a unique position among modern big box chains for having a good reputation on ethical issues like worker's compensation (at least pre-pandemic), and this seemingly agreeable business relationship with brands is another example.

paulie_a 6y ago
Rumor had it their enamaled iron cookware is la cruset. I have a Dutch oven that was 60 dollars vs the 200+. I'm willing to bet it's true because I can't really name another french cookware company specializing in that sort of goods.
- alexwasserman 6y ago
  https://www.zwilling.com/us/staub/ https://www.zwilling.com/us/staub/ https://www.emilehenryusa.com/ https://www.emilehenryusa.com/ No idea which Costco uses, but Le Creuset is definitely not the only French enameled cast iron manufacturer.
- asquabventured 6y ago
  Staub is another French cookware company that makes enameled cast iron. Great stuff, probably even slightly nicer than Le Creuset.
gthtjtkt 6y ago
Grey Goose is one of the worst vodkas on the planet according to most blind taste tests.
- otterley 6y ago
  Pepsi consistently wins blind taste tests against Coca-Cola, and yet the latter has a much larger market share. It’s a textbook proof of the power of marketing.
  - pfranz 6y ago
    I think soda's popularity is proof of the power of marketing. The "sip test" was thought to be flawed because taking a sip of something is completely different than drinking a glass of something. New Coke might be a better example since supposedly it was formlated to beat Pepsi in the sip test but failed miserably in the market.
- goldenkey 6y ago
  I am an actual vodka drinker and disagree. Grey Goose is actually really good vodka. And let's be clear, you cannot just group all vodka into one category. There is potato vodka, wheat vodka, rye vodka, and even other grain (and fruit!) types. Belvedere is one of the most expensive vodkas yet has a somewhat particular taste due to being rye vodka. It's not my favorite but I appreciate it for its unique characteristic..rye vodka has an interesting and wonderfully complex taste. Rye whiskey is quite nice too. Contrary to common perception, a good vodka isn't supposed to be tasteless - grain neutral spirit does not mean tasteless. It's called a spirit because even after the triple distillation, the "spirit" of the grain would still remain. And not every one is going to agree on which vodka tastes best because it's the same as if I tried to find the best flavor of ice cream. More important than preference for taste, good vodka has more distillation, less impurities, and thus leaves less of a hangover due to less tax on the liver and other organs. If you actually want a tasteless vodka you can buy what is termed an ENS, Extra Neutral Spirit. [1,2] Spirytus Wesoly is a very high quality ENS that sells for around $15 a liter. It is a potato vodka made in Poland, 192 proof 96% ethanol. The remaining 4% percent is almost entirely distilled water. Similar American-made Everclear is 190 proof 95% ethanol produced from corn. In constrast, unlike our Polish competitor, Everclear is sweet, sticky, and has a hint of sickly corn syrup in its taste profile. That 1% difference combined with the choice of a sweet corn versus starchy potatoes, makes for a vastly inferior product. But corn is subsidized in the U.S, so it makes sense from a business standpoint. If you wish to drink a 96% vodka without causing internal chemical burns, add some filtered water to dilute it to around 30%-40% ethanol. You should notice no grain taste at all - truly neutral. But not very enjoyable, at least in my opinion. It lacks character, rather hollow. Economical though..and has a range of other uses. I personally use it as a thinning agent in my custom e-liquid/vape-juice recipe that consists of about 20% ethanol, 70% vegetable glycerin, and 10% distilled water by volume. I also have it for use in making hand sanitizer and as a safe wound disinfectant. I wrote a blog post [3] a while ago on how methanol and other alcohols can seep through skin and poison one's body. This is why, aside from ethical reasons, I no longer use deodorants like Old Space Classic, that are formulated with methanol aka denatured alcohol aka wood alcohol. Methanol isn't suitable for food or beverages, making it a cheap industrial chemical, a convenient substitute for ethanol if health is disregarded. Methanol and other alcohols like isopropyl get converted by the liver into formaldehyde and acetone respectively, among other toxic metabolites. Over time, if one continues to use methanol based cosmetics, they are effectively mini/micro dosing a toxin daily, by transdermal means. [4] Sure, for most cosmetics, whether it be hair spray, lotion, or deodorant, it is a rather small dose of methanol, but why consume toxins even in small amounts, if avoidable? The big businesses like P&G are just doing it to make even more profit at the possible expense of your health. Toms of Maine on the other hand, uses ethanol because they actually don't roll dice with their consumer's health. Big biz is always playing shell games with risk reward balances. It's death by 1000 paper cuts corporate directing. For the same reasons, I highly suggest buying an ENS like Spirytus for use in your medicine cabinet in lieu of isopropyl which metabolizes into acetone. $15 for a liter of alcohol is actually not much more expensive than the price per volume for those plastic bottles of isopropyl. Mind you, HDPE (High Density Polyethylene) is chemical resistant, but lower density plastics, typically the more flexible kind, are vulnerable to reaction with strong solvents, acids or bases. Spirytus is sold in a glass bottle, entirely inert. Anyways, there's so many things wrong with the average risk most of us don't even know we've been subjected to. I think I've sold you on pure ethanol by now.. Hope you understand why vodka is made and marketed the way it is... [1] https://en.wikipedia.org/wiki/Rectified_spirit https://en.wikipedia.org/wiki/Rectified_spirit [2] https://www.ethimex.com/blog/2019/07/22/the-complete-guide-to-neutral-spirits-for-beverages/ https://www.ethimex.com/blog/2019/07/22/the-complete-guide-t... [3] https://churchofthought.org/blog/2020/04/25/cruelty-free-deodorant/ https://churchofthought.org/blog/2020/04/25/cruelty-free-deo... [4] https://www.fda.gov/drugs/drug-safety-and-availability/fda-updates-hand-sanitizers-methanol https://www.fda.gov/drugs/drug-safety-and-availability/fda-u...

ineedasername 6y ago

I stopped going to Costco when I realized 1) I couldn't get a parking space without 10 minutes of driving around looking and waiting for someone to pull out. 2) I couldn't pay for my items without waiting on line for 10 to 15 minutes and 3) Most items are a little bit to a lot cheaper at normal supermarkets if you wait for a sale and stock up. Costco has some unique frozen foods I like, and good prices on some fresh meat, but #3 above meant it was rarely worth going for more than 2 or 3 items, and #1 & #2 above meant it would always be a much bigger hassle than 5 minutes at the normal grocery store. Although I fully recognize that the above times are probably highly dependent on the setup & how busy my local Costco stores are. If I could get in and out of Costco as quickly as the grocery store (I drive by both on my commute home) I'd still have a Costco membership.

crooked-v 6y ago
The real value of a Costco membership is in the ancillary non-grocery stuff, like cheap glasses and contacts, discounts off high-end electronics, money back on plane tickets and rental cars, etc.
- timeinput 6y ago
  Yeah the PS4 and XBox gift cards tend to justify the membership cost on their own for me, so everything else feels like a bonus, and I don't feel bad about wasting money buying something somewhere else even if it's a bit more expensive since the Costco membership is already paid for.
  - voltagex_ 6y ago
    Huh. I think we get 10-15% off iTunes cards sometimes, but not Xbox. I would say the bifurcation into Gamepass vs Xbox Gold may reduce the value of any discount, though.
    - timeinput 6y ago
      It's been quite a while since I last used the deal since I've not been in the store. I think the last time I used it was something like $80 for $100 in playstation store gift cards, but I think I'm more used to the 10% off as the general rule for their gift cards. ETA: I just checked online and they're only 10% off (both Xbox and PS).

luhn 6y ago

Isn’t it pretty common for food manufacturers to white label their product for generic brands? IIRC this is hardly specific to Costco/Kirkland.

mark-r 6y ago
The difference is that other white label brands aren't expected to maintain or increase the quality from the name brand. It isn't unusual for white brands to be absolute trash in comparison. I have a friend who refuses to buy the Target store brands because he's been burned so often.
- deleted 6y ago
  [deleted]
- Azurin 6y ago
  Target brand is trash, Safeway brand is trash, and WholeFood's 365 is trash (also other wholefoods brands but I haven't verified those)
skwb 6y ago
Yeah, I thought Trader Joe's did this a lot also? I recall they're super secretive of what items they buy directly from name branded stores, and people have spent serious time trying to reverse engineer their supply chain. https://www.eater.com/2017/8/9/16099028/trader-joes-products https://www.eater.com/2017/8/9/16099028/trader-joes-products
- blaser-waffle 6y ago
  Yeah but Trader Joe's are often 1) higher end food (e.g. lobster bisque), or 2) quality basic foods. Same basic value proposition as Kirkland -- not name brand but consistently good quality.
cosmie 6y ago
Yes and no. Manufacturing can take many forms: 1. Manufacturers that only produce private label products for others, and have no consumer brands of their own. 2. Manufacturers that only produce branded products, and (for either operational or strategic concerns) does not produce private label products. 3. Manufacturers that, either intentionally or incidentally, have spare capacity and are wiling to use it for private label production. Mars Petcare is a good case study of all three[1]. They used to call into the third category and had several plants dedicated entirely to private label production. But for strategic reasons sold off their private label division and now fall into the second category, while the investment firm that bought those assets created a new company from them that falls into the first category. There's also a variant of #2: private label brands that do their own manufacturing. Krogers is an example of this - they outsource a number of their SKUs to other manufacturers, but they also operate at least 38 manufacturing plants themselves (figure from 2018)[2]. For manufacturers that do both branded and private label production, the situation isn't as clear cut as relabeling the same product: - Private label is an optimization, not a goal. For sufficiently large or mature manufacturers, this can mean your brand production runs happen on your state of the art production line or at your brand new facility, while your private label runs get the old stuff. This can create distinct differences in both the quality and capabilities of your branded vs. private label production. It can also mean you strategically reserve certain capabilities or innovations for your branded products, and don't make them available for private label clients. - Private label buyers rely on your product expertise and production capabilities, but not the opinions of your brand management team, which may ultimately result in a wildly different set of product requirements and eventual bill of materials. For example, just think about the different optimization goals between a private labeled product for Whole Foods vs. Dollar General. The same manufacturer may produce both, but they may look roughly similar, but the bill of material (and price point) may be wildly different as Dollar General consumers expect their prices to be low above all else while Whole Foods consumers are willing to stomach higher prices but also have higher expectations around the ingredients/materials that go into the product. And the same manufacturer making both of those may have a branded product of their own, which has to fit the image/expectations of their brand while being suitable for consumers at all of the retailers that stock their product. What's notable about Costco/Kirkland is that their set of requirements pretty much dictate that you have to treat the Kirkland product as a first-class citizen along with your own branded products. You can't hold back production capabilities solely for your own branded products, nor under-invest in the equipment/facilities that produce it. The "15-20% cheaper and 1% better in some metric of their choosing" aspect that's referenced in the article is less unique to Costco. That's likely the typical type of optimizations private label buyers request, a specific price point they know their consumers expect it to be and a product change that optimizes it by a metric valued by their particular consumer base. [1] https://www.foodbusinessnews.net/articles/12512-mars-petcare-exiting-private-label-business-in-the-us https://www.foodbusinessnews.net/articles/12512-mars-petcare... [2] https://storebrands.com/kroger-manufacturing-it-takes-village https://storebrands.com/kroger-manufacturing-it-takes-villag...

adrianmonk 6y ago

I don't understand the section on how the economics work. This French vodka maker doesn't quit selling vodka under their own brand. They just also sell some as Kirkland. So don't they have to keep doing a bunch of marketing so that their brand-name vodka keeps selling in all the other stores? How do they save any money on marketing? I would guess the real reason it works is that it opens up a market of people who wouldn't buy name-brand vodka at (say) $29.99/bottle but will buy Kirkland vodka at $19.99/bottle, yet without cannibalizing their ability to keep selling it (in other stores and in Costco) to people who are currently paying $29.99. Or another theory is that many Costco buyers aren't vodka experts, so there is some degree of randomness to how they pick vodka. If there are 10 brands of vodka, selling under the Kirkland brand and their own means they are 2 of the 10 brands instead of 1 of the 10, so to the extent that people pick randomly, they get picked twice as often. (It's like buying two raffle tickets.) A similar effect would apply to people who cycle through brands of vodka.

Skunkleton 6y ago
Also if company A is unwilling to supply a white label version, then perhaps company b will instead. Better to make money selling a white label then not make money because you didn’t.
kevindong 6y ago
The tl;dr; is that some profit is better than no profit (selling the white labeled money garners some profit vs. no profit if the manufacturer decides to not do the white labeling). The lower profit margins is made up for by higher volume.
megablast 6y ago
He is working out marketing costs per item sold. The marketing costs for the white brand is almost 0, since Costco does it.
- adrianmonk 6y ago
  Yeah, that must be what the article means to say. I think I was just stuck on phrasing like "brands don’t have to spend nearly as much money on marketing". I'm not sure I'm convinced that per-unit is a great way to analyze marketing costs since if you air a TV ad, it reaches a segment, so to me it seems more like an annual cost or something. But I do get what it's saying now.

zozin 6y ago

Costco holds a special place in my heart. Even though I'm single I still get most of my groceries there. I've been going to the same two locations for +3 years and I've seen very little employee turnover; the employees seem genuinely happy to work there, as opposed to other big box retailers such as Target or Wal-Mart, whose employees are often lackadaisical or barely out of training. I haven't had 100% success with all of their products, but the vast majority of the time I do not regret my purchase. I know that I'm getting a solid (if not stellar) product in that segment, as opposed to, say, Amazon, which in 2020 is basically making me pay $120 for Prime for the chance to play Russian roulette with their products, even the name brand ones. I will probably cancel Prime since it encourages unnecessary consumerism (at least it does for me) and the price has gone up 200% since my student discount is no longer applicable. Long live Costco! :p

dhosek 6y ago
Costco has a reputation for treating their employees very well with good pay and benefits. Overall, they have chosen not to prioritize profit above all else, and it ends up having ancillary benefits. I've noticed during the pandemic that the quality of the shopping experience seems to correlate very much with how the company treats their employees. A shopping trip to Costco or Trader Joe's is generally pretty stress-free. Whole Foods not as much (I attribute this at least partially to Amazon policies—even pre-pandemic, there was a notable difference in the experience of shopping at WF after Amazon took over). Going to Jewel is almost always a nightmare.
Cerium 6y ago
Costco is near and dear to me too. Curated shopping with a promise not to cheat you creates an exceptionally relaxing shopping experience. Regarding their employees, one of my best friends has been working there for about 8 years now and continues to enjoy it. Costco has a very high yearly employee retention rate (around 95% as I remember).
throwawaysea 6y ago
I’ve had a sort of revival of local shopping (at Costco and other places), even more so during COVID, since I value their presence and role as a social shared space. I am also cooking more, reading more, and spending more time outside. These changes have had me considering cancelling Prime as well, especially with recognizing the low return consumerism has for happiness and health compared to the simple things. In the same way, I feel like streaming services have resulted in a “digital consumerism” and I’m considering cancelling some of them as well.

mmmpetrichor 6y ago

It's a good story, but the whole premise seems to be based on a couple of anonymous reddit comments..

dhosek 6y ago
I've seen similar things reported in other venues that weren't sourced from reddit.

mark-r 6y ago

Costco has done a fantastic job of product selection. I've never been unhappy with anything I've bought there. If it's on the shelves, I'm going to trust that it's a decent quality for the price, no matter what brand is on the label. That consistency is key to making the private brand strategy work.

pravda 6y ago

Are we sure this is not a Submarine (PR-placed) article? "In a normal Costco purchasing example, a company might sell their product for $0.95 and Costco might retail it for $1.00. This would result in a 5% margin (in reality the margin is a bit lower, but let’s use these numbers for estimates)." That just rings really false to me.

mdorazio 6y ago
They actually list their margins in their normal SEC filings. For merchandise it's usually around 11% on average. Obviously it will be higher or lower than that for specific products. Costco is able to have margins way lower than retail average (Target runs around 28% for comparison) by having much lower per-revenue dollar operating costs and by doing an absolutely stupid amount of revenue per location (a single location will average close to $200M in sales per year).
- jmchuster 6y ago
  14% markup on Kirkland Signature and 8-10% on everything else.
- Animats 6y ago
  Costco has been annoying the drugstore industry by marking up the drug section at the same markup as the rest of the store. Markups at CVS, etc. are much higher. Costco has a smaller selection and only sells the big sizes, so it works out well for them.
parliament32 6y ago
https://investor.costco.com/node/22121/html https://investor.costco.com/node/22121/html Page 28, gross margins are around 11%.
blaser-waffle 6y ago
Just cuz it is a submarine -- god knows like 30% of the internet these days is subtle marketing -- doesn't mean the stats are fake. Costco is able to go toe-to-toe with Walmart and Amazon for a reason: they have the margins. And as another poster mentioned, they're a publicly traded company with SEC filings that discuss revenue, costs, and other details; we can check those numbers.

jb775 6y ago

The one thing about Costco that's annoying is how they double check your receipt on the way out and kind-of make you feel like a criminal that can't be trusted.

Consultant32452 6y ago
In most (every?) states it's illegal for them to force you to stop. I don't have a Costco membership, but some other stores around here pull the same stuff sometimes. I just politely tell the person, "No thanks" and keep walking. With Costco you risk them canceling your membership, so take that path with that risk in mind.
Fezzik 6y ago
I find it nice that they do it - one of the things they check for is items that you purchase via cardboard card (laptops, gift cards, gym memberships, etc...). I'm always surprised that people find it so offensive that someone is double checking that you got all your items while double checking that you aren't stealing. I've never once felt like a criminal. Proud member since 2001.
- kevin_thibedeau 6y ago
  They're checking for theft no matter what they claim.
  - blaser-waffle 6y ago
    For sure. But they're checking everyone, and mostly for optics. They're not singling you out, and it's not like waiting in line for 45 minutes for the TSA to frisk you. And most of the time they're not even checking, just looking for obviously sketchy low-hanging-fruit and spooking the half-hearted crooks.
jmchuster 6y ago
Well, yes, that's the intent. That combined with their members-only policy results in significantly reduced shrinkage, which further allows them to drive down operating costs and thus prices.

niftich 6y ago

Okay, sure, but Costco's real strength isn't people's abstract trust in the quality of the Kirkland brand, but the fact that there's (1) heavy curation, leaving very little selection, which limits consumer indecision and raises the stakes for suppliers; and (2) an extremely accommodating return policy, so you can truly rest assured that you're made whole. Lots of other stores have a money-back guarantee on their private label stuff, but are you really going to return a bag of $2 chips to a grocery store? But you've probably returned some big-price item to Costco before, so you likely have experience with the process. And when your purchase is closer to fifteen bucks instead of $2, you're a lot more likely to want the satisfaction guarantee. Costco gives you that, and you know in your heart that you're likely to actually use it if the item really doesn't work for you. As for curation and selection, there's no more than two choices at Costco for every product category. Instead of buyers checking every shelf and variety and sizing of 6 different brands of the same thing before they buy, they make only two binary choices: Do I need this? Do I want the cheaper one? Conversely, this means that your manufacturer's coupons, your rotating sales, your TV spots are all practically useless for tipping this market segment your way. As a producer, only way in to this near-captive market is to already be the leader, or to agree to make the Kirkland. Wouldn't you rather try than to be shut out?

xenihn 6y ago
I once left a $60 item in my cart in the Costco parking lot. It was a lot to me at the time because I was still unemployed after college. I didn't realize I had left it until I got home. I went back to Costco and looked around in the parking lot to see if I could find it, then I went inside to ask if someone had brought it in. I asked if they could refund it so I could immediately buy another one, and they let me. I don't think any other store would have allowed that. I'm now a high-earning adult who regularly goes to Costco with the original intent of buying two items, and leaving with a $200-$400 receipt. I know it's kind of pathetic, but spending money at Costco makes me really happy. I've spent an average of $5000 a year at Costco since I started working in tech. Easy to remember since I get roughly $100 back every year from the 2% on the Executive card. I've only returned like five products total ever, and none of them were pricy. I'm going to be sad when Costco starts to suck. It can't last forever.

wink 6y ago

Never been to the US or Costco, so can't comment on the quality there. But no matter how your international impression of Aldi and Lidl is, in Germany a few (or a lot) of their products are exactly that, rebranded versions of stuff that would cost 50% more if it had the original packaging, in another supermarket.

graton 6y ago
The US now has Aldi and Trader Joe's here. One is owned by Aldi North and one is owned by Aldi South. I forget which is which. Trader Joe's is well know for their store branded food items.