Costco’s Kirkland brand has become a secret weapon worth as much as $75 billion (COST)

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Costco‘s Kirkland Signature brand is one of the company’s biggest assets, accounting for nearly a third of it sales.
According to a recent report from UBS, Kirkland could be worth around $75 billion, which the analysts estimate is around $15 billion more than Estee Lauder, for example.
The Kirkland private label also helps to drive down prices for other brands at the store, as these brands must position themselves to better compete.

Costco shoppers can’t get enough of its Kirkland brand, and it’s become one of the store’s biggest assets.

According to a recent report from UBS, the Kirkland Signature label could be worth as much as $75 billion. That is over $15 billion more than Estee Lauder’s value, for example, a group of UBS analysts wrote on Friday.

A spokesperson for Costco did not immediately return Business Insider’s request for comment on the UBS report.

Excluding gas sales, Kirkland accounts for roughly 25% of Costco’s sales. Shoppers can find Kirkland products in virtually any category, from groceries to household products and clothing.

In Costco’s annual report released in December, the retailer announced that sales of Kirkland brand products grew to $39 billion in 2018, up from $35 billion in 2017. That’s good for a sales growth rate of more than 10%, slightly higher than the sales growth rate for all Costco merchandise.

"Kirkland is a brand in its own right," Karen Short, a retail analyst at Barclays, told CNN. "It is one of the reasons people go to Costco. That’s not necessarily something you can say about many private labels."

Kirkland is not only cheaper than other national brands, it also has a reputation for being good-quality.

"I am not sure there is another [private-label] brand that has established this level of trust," Timothy Campbell, a senior analyst at Kantar Consulting, told Business Insider.

Private-label brands have increasingly become a more popular choice as the stigma of "generic" goods has been lifted. These brands have better margins for retailers. Stores are buying goods directly from the supplier and cutting out the intermediaries, which can drive up costs in the supply chain.

And as competing brands might see it as a threat, this could mean lower prices for customers as these brands look to position themselves to better compete with Kirkland.

"When a traditional brand is losing shelf space or market share, what do they do? They create a better value," Costco CFO Richard Galanti told CNN in an interview.

If Costco undercuts a brand it sells with a Kirkland item, it often forces that brand to lower prices as well. It has happened with Poland Spring water, when after Costco lowered the price of a Kirkland 40-pack of water, Poland Spring reportedly also lowered prices.

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Source: Business Insider – feedback@businessinsider.com (Mary Hanbury)