Yesterday Fox News and the Dow Jones Newswire ran an interesting article on Kirkland Signature at Costco although the headline is a bit of an overpromise, it is still worth taking the time to read.
Costco Wholesale Corp.’s chocolate-dipped, slightly salty Kirkland Signature Nut Bars became a hit at its stores earlier this year.
Unfortunately for Kind LLC, that meant its own best-selling, chocolate-dipped, slightly salty Kind Bars now faced cheaper competition on Costco’s shelves.
Kirkland Signature, Costco’s store brand, is challenging manufacturers hoping to earn or retain a coveted spot at the warehouse retailer. Since 1995, Costco has used its Kirkland products to attract shoppers, building a reputation for quality and low prices on milk, toilet paper, men’s shirts and golf balls bearing the unassuming red logo. About a quarter of Costco’s $118.7 billion in annual sales come from Kirkland Signature products, and the percentage is growing, company executives say.
LaunchPad Inc. founder Jeremy Smith, who works with food brands seeking Costco shelf space, tells clients: “Assume a ‘KS’ version of your product will come into the market.” When that happens, he said, savvy manufacturers, offer Costco new versions of their product, tweak packaging to highlight what’s better about their brand or spend more on marketing — all costs Costco doesn’t incur with Kirkland.
At Costco, negotiating for a spot in stores is a complex dance. Brands fight for space at the retailer’s cavernous warehouses, which on average carry only 3,800 products. The typical Supercenter sells over 100,000. Adding to the pressure, Costco often introduces a new Kirkland product when its buyers or executives believe a brand isn’t selling at the lowest possible price.