Why Beer Is So Affordable At Costco

If you've ever planned a party or gathering and immediately thought of Costco when it came to supplying the beer, you're not alone. Costco, in addition to being the absolute best store to buy meat from, is a pretty thrifty place to purchase both big-brand beers and smaller craft IPAs, stouts, and lagers, and in larger quantities than you can find in most grocery stores. If you're wondering just how Costco manages to offer such affordable prices on its beer selection, you should know that the company has a low mark-up percentage on all its grocery items, something like 15 to 40% less than other retailers, and a huge reason for that is its business model.

As fellow grocer Aldi has managed to do for its food and beverages, Costco has found a business model that allows it to give customers some of the best deals on beer to be found anywhere. And unlike the German chain, one of Costco's major price-cutting techniques includes charging membership fees. These fees actually make up over half of Costco's annual profits, and they're a huge reason why the warehouse chain can charge such low prices on not just beer, but on anything it sells. Consider that Costco actually makes more money giving you a right of entry to its beer selection than it does off the actual purchase of those cases.

Step foot inside a Costco, and you'll see the Kirkland Signature (not Costco) brand seemingly everywhere. The house brand, which is named after Kirkland, Washington, the city where Costco was first headquartered, is another reason why the warehouse chain can price its beer so low.

In case you weren't aware, Costco doesn't run a bunch of factories that produce all the different items that form its Kirkland line; instead, it outsources the making of most items to manufacturers that are already producing the products it wants to sell, and sometimes these happen to be the same ones that supply the big-name brands, too. Cutting out the middle-man — the big-name brand, and the baked-in costs associated with it, like marketing and advertising — from the supply chain saves Costco money, which it then passes onto customers.

So as Costco has commissioned the brewer Deschutes to produce its Kirkland Signature Helles-style lager, it's offering great value to its customers in two ways: First, by selling what is essentially a brand-name beer at a knock-down price (and all because it uses the Kirkland name on the packaging). And second, by continuing to contribute to the overall business model, as outlined above, that allows Costco to continue its very successful operations, beer-related and otherwise. Consider the next time you pick up a 12-pack of Kirkland Signature Lager that you are reinforcing Costco's operating design to a tee.