In related Costco news, Miller’s Brew Blog is reporting that the big box store chain will be creating three private label beer brands under the Kirkland name: a hefeweizen, amber ale and pale ale. The Gordon Biersch production brewery in San Jose, California — who also makes competitor Trader Joe’s private label beers — will be brewing the beer for Costco. Private label products tend to have higher profit margins than regular brands, so undoubtedly that’s the motivation here, as well. Given that most Costco stores carry only a very few beers, and even fewer craft beers, this strikes me at first blush as another bad omen for better beer. I doubt they’ll be increasing the number of beer skus each store will carry but more likely will shove less well-established local brands out the door to make room for these.
The few craft beers carried by Costco is Sierra Nevada, Sam Adams and a few others I don’t see them added a private label hurt any of those guys sale. It’s not like they carried small craft breweries to begin with, I think you are making much ado about nothing, this won’t really impact craft beer.
Furthmore if them carrying a private label of other styles than light lager, I can see that as being a good gateway product to getting new drinkers finding craft beer.
At worst a wash, at best it may help the industry.
Thomas,
Thanks for your thoughts, but I can’t be as optimistic. It’s those “few others” you speak of that I think may be at risk. I assume you know that retail stores use schematics to carefully plot out exactly where every single item they carry will be placed, and through that they also control exactly how many skus of a particular type of good they will stock. At a store that does the volume of Costco, those are like gold. Here in California, beyond the big macros and the bigger regionals like, as you mention, Sierra Nevada and Samuel Adams, each Costco carries a few skus that are somewhat local. Anchor, for example is in Bay Area stores but not outside there. Drakes is carried in the east bay, but nowhere else. Above San Francisco, where I live, they carry Lagunitas and Mendocino. All of those are relatively small. They are also the most likely brands that will be displaced by the Kirkland private label beers, because it’s highly unlikely they’ll create slots for three new beers. To do so would mean dropping three other non-beer products and that’s even less likely because of how carefully analyzed such decisions tend to be. As big as these box stores are, they’re still a fixed size and can carry only a specific number of products. They have chain buyers who buy a specific group of product types — I’ve known several personally over the years — and they tend to be quite protective of their turf because their own salaries are tied to the performance of the items under their responsibility. No one’s going to willingly give up three of their own products to make room for another buyer’s. So that means the ratio of light beer to non-light beer won’t change and so instead of being able to buy a case of Widmer Hefeweizen or Pyramid Hefeweizen you’ll be offered Kirkland Hefeweizen instead. I don’t see that as a wash or helping the industry at all.
Wow. Jay, that’s great perspective there in your comment (good post too) – something I’m a bit familiar with in other industries I worked in. You’re absolutely right about shelf space. I worked at one company that bought out a large competitor a few years ago, but the company that was bought out still has product on the shelves today because it was a different ‘brand’ and therefore gave them more shelf space. If they consolidated brands, they’d surely lose 50% of the space they already had. Anyway, good stuff as always.
What? So next is Walmart and their Chinese knockoffs of American micros…can’t be far behind!
I think it will ok. They adopted the wines and liqours in the Kirkland brand, but still carry all the big names. I do not see Costco removing any of the Sam Adams, Hieneken, Bud, Miller, etc off of their shelves. Our Costco last year expanded it’s Liqour area, and I think that will continue to happen. The people that need to be worried are the small liqour stores that can compete with their prices. I am also happy that these beers are going to be handled by Dan Gordon and the Gordon Beirsch Co. At least Costco doesn’t have one of the big three brewing it for them. Jay, I posted all 4 logos on my site if you want to pass them along.
http://noblebeernews.blogspot.com/2008/02/gordon-beirsch-brewing-4-new-beers-to.html
Great blog!!! Keep up the great work!