The Big Interview: Costco’s Chad Sokol
Chad Sokol, vice president of wine and liquor at Costco, is on a quest for hidden gems, writes Sarah Heller MW, with fine wine from Bordeaux a surprising priority for the wholesaler.
When the economy is tough, people come to Costco; when times are good, people come to Costco,” says Chad Sokol, vice president, global foods & sundries across Costco’s wine/liquor and candy departments. If that title sounds rather sprawling, it’s a reflection both of Sokol’s expansive role and what he repeatedly calls the “Costco jigsaw puzzle”.
A warehouse club operator known for US$1.50 hot dogs and cheap gasoline, Costco has long confounded the wine industry by moving not only Kirkland Signature private-label wines, but also fine wines such as the Duclot Bordeaux collection, Hospices de Beaune lots and insider favourite Giodo Brunello.
Sokol doesn’t see the contradiction.
What he calls Costco’s “high-end” membership pays an annual fee for consistently low margins, capped at 14%–15%, on quality products including meat, drinks, appliances and jewellery. Depending on the location, wine may “piggyback” on this ecosystem, but sometimes it’s the driver of foot traffic.
Right-sized
Costo’s wine and liquor footprint isn’t visibly huge, Sokol says, but it moves volume and drives excitement. Sokol first led wine/liquor following the 2019 retirement of Annette Alvarez-Peters. His first stint spanned the Covid-19 pandemic, when he says Costco experienced roughly five years’ growth in little more than two. The challenge wasn’t generating demand, but keeping products in stock. Returning late last year after a spell in other departments, Sokol inherited a category that had “right-sized” as post-pandemic demand normalised.
Nonetheless, he says his department has already returned to growth; members may be buying less, but they are typically spending more per bottle.
“I’m very optimistic,” he says.
Wine is especially important for Costco. Across US warehouses licensed to sell all three categories (beer, wine and spirits), wine accounts for a little more than half of beverage alcohol sales by value, Sokol says, while spirits sit at 35%–40% and beer at less than 20% – almost the reverse of the typical US retailer.
Costco does not release granular sales data, but 2023 estimates from Forbes put its total global beverage alcohol sales at US$6.5bn–US$7bn. The US, home to around 600 of the 900 Costco warehouses, is responsible for much of this.
Costco and fine wine
Fine wine is a strong focus going forward. In Costco parlance, “fine wine” – displayed in wooden boxes – encompasses wines priced at more than US$9.99 at retail, though some higher-end stores offer full pallets of wines at US$50-plus a bottle. Sokol calls these 18- to 30-bottle boxes some of the department’s “most efficient space”.
The fine wine ambition, he says, has been there from day one, crediting its realisation to Alvarez-Peters’ years of relationship building after a tricky start. Sokol recalls stories of Costco’s early Bordeaux buying trips, when producers barely knew what the wholesaler was. Today, Costco is a market mover for Bordeaux, which it buys en primeur, offering the wines once they are bottled and released.
Sokol says last year’s 2022 vintage produced one of Costco’s strongest Bordeaux sales years, a striking contrast to Bordeaux’s fortunes elsewhere.
“Values” and “bright, crisp white wines” are also driving growth, the latter reflecting a shift from five to 10 years ago. Kirkland Signature Marlborough Sauvignon Blanc, priced at US$6.99–US$7.99 depending on store location, is one of the department’s best sellers.
Costco seems to be playing a different game from both specialist drinks retailers and grocery chains. It offers neither the broadest range – on average, each warehouse stocks 200 SKUs between beer, wine and spirits – nor the most elaborate customer experience. Instead, it relies on tight curation, low margins and the Costco machine’s relentless footfall.
The treasure hunt
If Costco’s wine/liquor strategy isn’t about expanding its footprint – which Sokol predicts will stay “similar” over the coming decade – and warehouse additions will remain stable at around 25 new stores this year, he is determined to make the existing space work harder.
The company focus is the “treasure hunt”, he explains.
“Our goal is to give members something new every time they shop,” Sokol says – typically “every couple [of] weeks”.
The focus is on items unique to Costco, whether Kirkland Signature or “high-end items” not readily available at traditional outlets. While products typically arrive at Costco on full pallets to be forklifted directly onto the floor, the smaller boxes used for fine wine allow buyers to introduce limited parcels, gauge demand quickly and either grow the SKU or move on after honouring the commitment. pricing conundrum Prestigious producers have sometimes worried that appearing at Costco could undermine pricing elsewhere in the market.
However, Sokol says Costco’s model means it has little need to slash prices to drive traffic. Instead, the treasure hunt comes from scarcity. “Someone comes in, they see a great bottle they’ve had in a tasting room or restaurant,” Sokol says.
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“We might only bring in a few bottles and sell it very quickly. If that member loves the wine, maybe they need to go somewhere else to keep buying it.”
Private label
Few private-label programmes provoke as much speculation as Kirkland Signature and who makes it. However, this arguably misses the more interesting question of how Kirkland works. Costco’s approach is unusually collaborative. Rather than spot market purchases, Sokol describes long-term partnerships with dedicated winemakers. Industry sources describe a highly transparent commercial model with open-book costing. Some producers are named on the label; others remain anonymous.
Sokol describes two distinct functions of Kirkland within Costco’s wine/liquor department: the first is to over-deliver on value in familiar categories, drinking like a same-appellation branded wine, but at 30%–50% better value. The second is almost the opposite. “Sometimes we can use Kirkland Signature to introduce a region that maybe members aren’t super-familiar with,” Sokol says. “That’s the power of Kirkland; our members already trust the brand.”
He highlights KS Chablis Premier Cru – made by Jean-Marc Brocard’s Pierre Brissy – which had few branded equivalents at Costco when released. The latter type of Kirkland SKU typically rotates more frequently.
Asked how Costco’s Kirkland customer differs from its fine wine customer, Sokol surprisingly says: “I think they’re the same consumer. The member picking up a case of Kirkland Signature Prosecco may also leave with a bottle of fine wine.”
Kirkland is essentially an extension of the treasure hunt. Though there are other private labels that function this way – those belonging to Berry Bros. & Rudd or The Wine Society, for example – none comes close to Kirkland’s scale and, notably, none sells out of a warehouse.
Market tailored
Given its immense scale, many assume that Costco’s buying approach is highly centralised, but Sokol says wine/liquor buying remains fundamentally regional. Each of Costco’s eight US buying offices and some global offices have a dedicated buyer and sometimes a separate spirits buyer, working with local distributors or producers to fit the tastes – and complex legal realities – of each market.
The resulting assortment can vary dramatically. In the critical California market, west coast wines dominate, while other regions have more imports; some Costco stores are spirits-heavy, others wine-dominant. Even within northern California, Sokol’s previous base, he recalls seeing 10 distinct “micro-markets” across roughly 50 warehouses. Still, as the company has expanded domestically and internationally, Sokol says Costco has deliberately broken down internal silos. Suppliers, he says, should view Costco as a single global company.
That collaboration functions at several levels. Costco’s country managers from all 14 national markets meet monthly at the headquarters in Issaquah, Washington, while the global wine/liquor buying teams have a bi-weekly conference call to discuss strategy and sales plans. Kirkland Signature wines are developed centrally, while some programmes, notably Bordeaux, are coordinated internationally.
The benefits, Sokol argues, extend beyond logistics. “Some of our absolute best items that we do here in the US come from our international countries,” he says. “If Costco in Taiwan or Korea brings in an item and it does really well, we give it a shot here.”
The company is famous for offering free samples throughout different categories, yet alcohol is a notable exception. Elaborate events and hand-selling, considered critical for fine wine, aren’t part of the Costco experience. Some larger warehouses employ wine stewards, but most members browse independently, guided by simple shelf talkers with critics’ scores.
‘Bricks-and-mortar first’ approach
While Sokol calls e-commerce “a great opportunity for us”, he notes that Costco remains bricks-and-mortar first. In a country where regulatory complexity has plagued businesses from Amazon Wine to Drizly, the company’s desire not to “overcomplicate the business” is perhaps understandable.
“Just let it sell itself’ is Costco’s philosophy,” Sokol says.
However, simplicity shouldn’t be mistaken for complacency. Most Costco wine buyers have completed at least WSET Level 2 qualifications, with some at Level 3 or Diploma, supplementing regular travel to wine regions and supplier-provided education, especially from Kirkland’s winemaker partners. Yet Sokol notes that technical wine knowledge is just part of it. “You obviously have to have a good palate,” he says. “But it’s the complexities that are so challenging.”
Sokol means regulatory complexities, rather than anything product-related; he explains that Costco buyers’ training and the company’s experience of navigating the different American states’ highly varied licensing requirements and distribution structures is a competitive advantage. Buyers regularly rotate between departments, and the emphasis on “systems rather than individuals” helps explain Costco’s resilience. Many of the company’s long-serving buyers have retired in recent years, but Sokol suggests their successors are even more likely to rotate between departments.
And does the buying team have direct contact with members? Sokol’s answer is quintessential Costco: members routinely email the CEO with product requests, which are then forwarded on to the relevant buyer to consider.
Logistical efficiencies
“People have been drinking wine for thousands of years,” Sokol says. “I don’t think it’s going away.” However, he is under no illusions about the wine industry’s prospects. Consumption is shifting, and there are price pressures, climbing import tariffs and much more. Through the challenges of recent years, Costco has learnt a lot about gaining logistical efficiencies in partnership with suppliers, especially for Kirkland: buying more at once, bringing shipments forward, spreading them out.
If Sokol sounds unequivocally bullish about anything, it is Costco.
Whether the wider wine trade shares that confidence is another matter; his responsibility is to make Costco successful, whatever market conditions emerge. He envisions little fundamental change. It’s quicker rotations, constantly new items, new excitement – and more treasure hunt.
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