Why Costco's Kirkland Signature Isn't Just A Cheaper Knockoff Brand

Lots of grocery stores have loyal fans, like Trader Joe's, Publix, or Wegmans, but the love people have for Costco always feels more intense, and a lot of that has to do with their affordable store-brand Kirkland Signature. Store-brand products are normally nothing special — every grocery chain or big box retailer has some version of them — but Kirkland Signature is special because it cuts against the expected purpose of store brands. When you buy a brand like Kroger's Signature Selects or Target's Good & Gather you aren't expecting it to be bad, but the product is understood to be of a little lower quality for a meaningful discount on price. But Costco shoppers know Kirkland isn't like that. The prices are lower for sure, but often the product is as good or better than the brand-name competition.

This isn't luck or confused shoppers taken in by Costco branding, the company has made a concerted effort to source good products like pizza and spices for Kirkland Signature. Instead of a dumping ground for cheap knockoffs, Costco puts a lot of thought into what it markets under the Kirkland brand, zeroing in on brand-name items with a unique mix of popularity and room for price cuts. The goal isn't maximizing the profit margin on each Kirkland item like most retailers, instead, Costco's strategy is to present shoppers with a truly unique mix of affordability and quality to keep customers coming back through brand loyalty.

Costco has strict standards for sourcing Kirkland Signature products

The consistency and quality of Kirkland Signature's products have fueled rumors about who actually makes the products, with fans speculating that premium brands like Grey Goose make items like the Kirkland French Vodka. While that theory is not actually true, Costco does source many of its store-brand products from the same manufacturers that make the brand-name versions, and even when they don't they find sellers of similar quality. That French vodka isn't Grey Goose, but it does come from a French distiller from the same region. Kirkland Signature's balsamic vinegar comes from Modena in Italy, the vinegar's home region, and its olive oil passes difficult standards for quality and purity, and even gets used by professional chefs.

Costco's strategy for Kirkland has clearly paid off. Not only do things like Kirkland Signature liquors do great with reviewers, but the brand now accounts for around 30% of Costco's total sales. At nearly $60 billion in sales, it brings in double the amount of business of Wal-Mart's store-brands and makes more money than huge national brands like Kellogg's and Campbell's. And Kirkland keeps expanding into new products like shaving razors and kombucha, for a true one-brand shopping experience that takes the stress of selection off of customers. That means the only thing left for fans to worry about is whether Costco can keep the Kirkland Signature success story going for the long run.