Why I Buy Wine At Costco and Trader Joe’s

[EDIT: For more recent info on Costco and Trader Joe’s, check out our recent week long series on each: Costco Week 2013 and Trader Joe’s Week 2013.]

Here at the Reverse Wine Snob we’re all about finding great wine for under $20. Critical to the success of that strategy; however, is finding the most inexpensive place to buy wine. After all, the lower the mark-up the better the chance of finding good wine under our $20 threshold. I’ve seen the exact same wine for wildly different prices at competing stores so finding the best stores in your market is critical. For many of us, those stores will include Costco and Trader Joe’s. Here’s why:

Costco’s average margin (per their financial filings) is about 12%. Costco has stated that the highest margin they will take on a non-Costco brand is 13% and they strive to keep it closer to 10%. On private label (Kirkland) items they will go up to 15% margin but of course the price is still lower than other brands because they are cutting out the middle man. It’s an amazing business model — their stores average about $130 million in sales annually. Their total revenue is around $75 billion and they make several billion in net earnings and investors complain because they think their margin is too low and they pay their employees too much!

So what does this have to do with buying wine? I believe the 10-13% margin is similar for alcohol. I was talking to a manager the other day and I commented on how a local upscale restaurant was advertising a 2008 Coppola Claret for $12/glass and $46/bottle! At the time my local Costco was selling this wine for $9.99/bottle. He stated Costco’s mark-up on that item was 12%, which would put their margin at just under 11%. This means that unless you’re dealing with a special buy/close-out type situation you really are not going to find wine any cheaper than at Costco.

The other nice thing about Costco is the limited number of wines they carry. Why is this nice? Because in my experience their buyers do a fantastic job picking out high quality products. If they stock it, you can be fairly sure it’s good, unlike some of the bigger chain stores. Because they are the largest retailer of wine in the U.S., products tend to turnover quickly so there is quite a variety over time. The downside of this is that a wine you loved may be gone the next week so if you like it buy a bunch!

Trader Joe’s is a little different in that they really concentrate on finding items that are unique to their stores. 80% of their grocery items are Trader Joe’s brands. It is not nearly as high for wine, but they do seem to have a good number of exclusive wines. While I’m sure the margin is higher than Costco, by making exclusive arrangements with producers they are able to offer great pricing. At my Trader Joe’s they have a huge selection of wines for under $10. I did; however, notice that the 2008 Coppola Claret I mentioned above for $9.99 at Costco was selling for $16.99 at my Trader Joe’s. I have seen other wines at both stores that were similar in price though, so this could be from a bulk buying discount.

My rule of thumb is to buy any wines that are widely available at Costco, plus their excellent Kirkland Signature brand wines. I go to Trader Joe’s to get some great deals on their exclusive wines under $10. If you have a good independent retailer near you they can be a valuable resource as well for finding some lesser known gems. I also check the ads from the chain stores in my area to take advantage of special deals on wines I’ve already targeted to try.

What does this all mean? At least for us, with both Costco and Trader Joe’s in our market, it means we have a fabulous combination of stores for meeting our Reverse Wine Snobbery needs!

One other note on Costco: typically any price that ends in .97 is a mark down. Furthermore, if there is an asterisk on the label that means it is a close-out and is not coming back. At least in our area mark downs are rare in the liquor store, but watch for them nevertheless! I’ve heard stories of some amazing deals in other markets. This is a great tip for shopping the rest of the store too — we’ve picked up some awesome deals on marked down items but they go fast!

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