The category has surged 46% in the past five years, blowing past the company's broader food offerings. Analysts attribute this sales growth to the cult status of Costco's high-end Kirkland private label brand, which has a markup of only 10% to 14% despite its quality. The retailer began selling Kirkland wine in 2003, followed by spirits in 2007 and later a line of craft beers. They’re doing the opposite of looking to cut corners,” David Schick, lead retail analyst at Consumer Edge Research, told Bloomberg. “They’re looking for maximum quality and minimum markup to drive value for the member.”

Dive Insight:

Costco saw disappointing overall sales during the holiday period, but the club store's alcohol segment lifted spirits. 

Much of this success comes from consumer confidence in the quality of Kirkland brands. The club store has been investing in its private label offerings for some time, and has found success by pushing the Kirkland name as premium rather than discounted. However, the sources of the beverages remain a mystery, as Kirkland Signature items are produced by what the company calls, “various manufacturers.”

Costco has lured shoppers to its private label offerings through low prices and special deals — a dominant strategy in today's retail space. Store brand sales reached an all-time high of $118.4 billion last year, cornering a record 17.7% of the total market, according to the Private Label Manufacturers Association’s 2016 Private Label Yearbook.

Read more at source: FoodDive