What Makes Costco's Liquor So Cheap?

Shopping for liquor can be a daunting task. With so many stores, brands, and different types of alcohol to choose from, it can be hard to know where to start. Luckily, Costco makes it easy to find the perfect bottle — and at an unbelievably low price. But how do they keep their prices so low, and still make a profit?

If you've ever been to a Costco, you'll know that their prices are almost always the lowest around. This is especially true when it comes to liquor, which is sold in 60% of Costco locations. Whether you're looking for beer, wine, spirits, or something else, you can almost always count on Costco to have the best prices in town. So what's the secret behind the low-cost sauce?

It turns out that Costco's secret weapon to keeping their prices low is the much beloved Kirkland brand. This private label is exclusive to Costco, and it allows them to offer lower prices on certain items — including liquor.

Kirkland: Costco's secret to low prices

The Kirkland Signature private label is the secret behind Costco's low liquor prices. Costco owns the brand, and it allows them to keep their prices low without sacrificing quality. The Kirkland brand is actually sourced from some of the best spirits producers in the world. The only difference between Kirkland Signature-branded products and some of the most popular global liquor brands is the label.

The Kirkland brand also allows Costco to cut out the middleman and buy liquor directly from the producers. This means they can save money on overhead costs and pass the savings on to customers. In fact, most of the liquors sold at Costco are Kirkland-branded, although brands such as Jack Daniels, Smirnoff, and Bacardi are also available. However, those name brands will invariably cost more than Kirkland Signature spirits. And, that's all thanks to the sales markup.

What is a markup and how does it affect the price of liquor?

If a seller wants to make a profit, they have to sell their products for more than it cost to make or buy from their supplier. The difference in price between what the seller paid to buy or make the product, and what the consumer pays for it, is called a markup. The standard markup in the retail alcohol industry is 25% to 45%. Yes, that means sometimes you pay almost 50% more than the company paid for the product. And a markup is applied at every stage of the journey, from distiller to distributor to purveyor. 

Markups are how businesses don't just break even, but expand. The money gained from markups can go toward overhead costs, such as employee compensation, office supplies, or utility bills. When money is leftover after covering costs, it can be invested back into the company in order to expand. In this way, markups are a necessary evil for businesses.

But Costco's business model is centered on decreasing markups. Costco's markup on Kirkland Signature liquor is usually only 10% to 14%. With all these low markups, how does Costco make any money? From selling in bulk. By cutting out distributors to buy goods directly from producers and offering lower markups while only selling in bulk, Costco ensures they still generate a net profit from most of their sales.

How to find great deals on liquor at Costco

Thanks to the Kirkland brand and their direct-from-producer model, Costco is able to keep their prices low without sacrificing quality. They also have a wide selection of beer, wine, and spirits, as well as hard-to-find seasonal and special releases — even some fairly expensive options for a taste of luxury.

If you're looking to save even more money on liquor at Costco, there are a few things you can do. Take advantage of their bulk discounts, look out for special deals, and shop around to compare prices, after all, a sale is a sale no matter where. At the end of the day, it's no wonder that so many people are turning to Costco for their liquor needs. With their low prices, wide selection, and excellent customer service, it's easy to see why. With these tips, you can be sure that you're getting the best deal on your favorite drinks.