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Written by Ryan Collins, Team Lead – Costco, Harvest Group
Costco is focused on providing the best value on high-quality food items for Costco members. Brands looking to sell food products into Costco should consider what is important to the retailer when approaching a meeting with the buyer. In our experience, Costco prioritizes price value, quality, specific item and key attributes, and packaging when evaluating food products for distribution.
In this blog post, we’ve outlined a few priorities for food brands to keep in mind for Costco.
1) Price
“Right Price” is one of Costco’s key rights of merchandising as the retailer aims to provide high quality items at the right price to members. Members pay to shop at Costco and therefore expect a value verse other retailers. For food items at Costco, it’s important to present a price point that is differentiated from mass and grocery retailers for comparable items to provide additional value to the member. For reference, most Costco food buyers are looking for 30%+ on the value at retail and 20% minimum at cost. In addition, price pack architecture is key to landing the correct channel price slopes.
2) Item Attributes
Costco desires brands that strive to bring the best to the member’s table by elevating food offerings with any of the following applicable item attributes:
- Clean ingredient deck: For Costco, this means as few ingredients as possible, ingredients we can pronounce, naturally grown vs. manufactured.
- Ethical & sustainable sourcing: Costco prioritizes ethical sourcing and supply chain practices.
- On-trend: Come prepared to show your items are performing well on social media or playing into a certain health or food trend.
- Key attributes (listed below) that the merchant and member will give you credit for at the time of purchase
3) Key Attributes
After ensuring your item is meeting the most important attributes for Costco, stand out beyond the competition by stating any key attributes on your packaging:
- Organic
- Non-GMO
- ABF Free
- Low Sodium
- High Protein
- Low Sugar
- Allergen Free callouts
- No Palm Oil
- Ingredients sourced in USA
Buyers have initiatives to source items from local regions, so be sure to communicate when ingredients are sourced in the U.S. and specify where they are sourced to get credit when talking to your buyer.
Organic items are a staple at Costco and expected by members. The retailer has increased organic SKUs stocked by 278% from 2012-2022 as a result.
4) Packaging
Use packaging to communicate your differentiators and provide additional value to the Costco member through:
- Sustainability attributes – how can you remove waste and be as close to 100% recyclable and/or compostable?
- Design efficient pallet configurations which protect the product
- Responsibly sourced packaging without sacrificing quality
- Resealable packaging for freshness upon reopening
Costco’s “6 Rights” of Merchandising
The priorities for food brands listed above should be considered in addition to Costco’s core “6 Rights” of Merchandising.
- Right Merchandise – ensure your product is top quality in branding/packaging, exciting, provides great value for the consumer, and propels shoppers on an in-store treasure hunt.
- Right Place – be certain your product is displayed presentably; it is important members can identify the product in 5 seconds and from 5 feet.
- Right Time – secure a new product at Costco before other competitors have it. Be early in, early out.
- Right Quantity – with the limited SKU environment at Costco, it is critical to be in stock.
- Right Condition – confirm your product is clean, undamaged, and that the pallet display is ready for the unique warehouse environment.
- Right Price – establish a value to rest of market.
Before pitching your item to Costco, it’s important to make sure your item is positioned to satisfy what is most important to the retailer. With the right item, Costco is a channel that can provide significant trial, visibility, and ultimately sales for your brand.
At Harvest Group, our Costco team represents brands across categories to create the most effective strategies to win at the retailer. We take a customized approach to ensure that your items are well-positioned for Costco, without disrupting the rest of the marketplace. If you’re interested in learning more about Harvest Group’s model at Costco, reach out to us at [email protected] or fill out our Contact Us form here.
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