Why has Kirkland Signature been so successful?
The Kirkland Signature brand exceeded $59 billion in sales in Costco’s 2021 fiscal year, up 13.4 percent year-over-year and accounting for 31 percent of the wholesale club’s total revenue. How did it get so big?
The size of the Kirkland brand surpasses all but a few CPG giants — only Nestlé, Procter & Gamble, PepsiCo and Unilever appear bigger — and it is by far the largest CPG private label. Walmart in 2020 put its Great Value brand at somewhat over $27 billion globally.
Costco formed the Kirkland brand 1995 and quickly expanded it across categories ranging from diapers to toilet paper, tires, golf clubs, luggage, wines and rotisserie chickens.
As noted in a recent CNN profile, one reason for its size was the decision by Jim Sinegal, Costco’s co-founder and CEO in the nineties, to focus on a single brand.
“The conventional wisdom said that you had to have a different name for every class of product that you had — à la Sears Roebuck with the Kenmore appliances and the DieHard batteries and the Craftsman tools,” Mr. Sinegal said in 2019 at a talk for Georgetown’s McDonough School of Business. “We looked at it and we said, you know, we’re in so many countries and we have such a wide array of products, we’ll have a room full of attorneys that are doing nothing but trying to clear these names.”
A second priority for Costco from the start was to make Kirkland’s products “equal or better quality than national brands” while striving for comparative savings of at least 20 percent.
Costco was expanding in the U.K. in the early nineties and Mr. Sinegal saw many chains overseas finding success with higher-quality house brands.
Costco usually gives a brand name supplier the chance to make the cheaper Kirkland version and often forms collaborations, such as Starbucks-roasted Kirkland coffee beans or Kirkland Einstein Bros. bagels. It has also abandoned store brand categories, including cosmetics, soda and toothpaste, if the national brands perform significantly better. Costco’s CFO Richard Galanti said of Kirkland in a 2017 Wall Street Journal article, “We try to be agnostic on it. We try it like any other brand.”
- Costco 2021 Annual Report – Costco
- Walmart’s Great Value brand earns more than $27 billion annually – Store Brands
- Why every Costco product is called ‘Kirkland Signature’ – CNN
- Costco Wholesale Corporation Co-Founder and Former CEO Jim Sinegal – YouTube/Georgetown University
- How Kirkland Signature Became One of Costco’s Biggest Success Stories – The Wall Street Journal
DISCUSSION QUESTIONS: What are some obvious and less obvious factors in the success of Kirkland Signature? What can other retailers learn or replicate from Costco’s approach to Kirkland?