Influential Costco executive discusses wine business in Q&A
Annette Alvarez-Peters is one of the most powerful people in the wine industry.
She supervises the wine buyers for Costco Wholesale Corp., which sold $3.7 billion in alcohol around the world last year. The sway Costco carries in the industry from the vineyard to retail shelf is tremendous because many wineries want a shot at floor space inside the big-box discount retailer, based in Issaquah, Wash.
Alvarez-Peters has held various positions within the company from an entry-level accounting job to merchandising receptionist. She was a beverage alcohol buyer in the company’s Los Angeles Division from 1995 to 2005, when she was promoted to her current position, assistant general merchandise manager of beverage alcohol.
Alvarez-Peters is definitely not a wine snob. Some wine connoisseurs got bent out of shape when she told a CNBC interviewer in 2012 that selling wine is no different than selling toilet paper. “But at the end of the day, it’s just a beverage,” she said in the CNBC interview. She is studying for her Masters of Wine.
To get a sense of the current wine (and beer) retailing environment, Press Democrat wine business reporter Bill Swindell conducted a question-and-answer session with Alvarez-Peters via email. The following is an edited transcript:
Q: How tough is it to get a wine sold at a Costco store?
A: By design, we have a very limited number of wines in our system. We tend to have a constant rotation of wines which we like to refer to as our “treasure hunt.” Each buyer is very selective in choosing items for their respective regions. We look for quality wines at a value.
Q: How big is your team? How do you settle on a mix of international versus domestic wine?
A: We have 11 buyers on the alcohol beverage team. Each is responsible for wine, beer and spirits for their region. Each region consists of two to 13 states with up to 60 stores. Each buyer deals with the necessary paperwork, PowerPoints and supplier/distributor meetings to run their business, in addition to getting into Wine Country and wine shows or tastings when time permits.
Our domestic wine business is approximately 65 to 70 percent. More import wines are sold in the Midwest and East Coast. We try to tailor the wine mix to the region and their demographics. Each buyer has the autonomy to purchase all categories for their region. In addition, they all do an excellent job supporting local wineries. For example, Washington state will have a larger selection of Washington wines, and Oregon will have various pinot noir and pinot gris from the area, whereas, our stores near the California Central Coast will have items from Santa Barbara and Paso Robles.
Q: What factors go into setting a price for a bottle of wine?
A: As with all items sold at Costco, (profit) margins do not exceed 14 percent. I think the wine industry varies in regards to making wines affordable, depending on the segment (premium versus luxury). There is a lot of competition at most premium and super-premium price segments, which can drive very affordable prices in the market.
Q: Has Trader Joe’s had any effect on your bottle price?
A: Trader Joe’s is a good operation. As a competitor, we watch their prices, as we do with any retailer carrying the same item. We adjust accordingly.