Costco's Secret To Keeping Beer Prices So Low

Costco is a shopper's dream when looking for low prices on electronics, home goods, and groceries. (Maybe that's also why getting in and out of the Costco parking lot is a nightmare.) Even its beer selection is priced lower than at other stores, and a main reason for that is of course what sets Costco apart: its annual membership. Every Costco member pays into the exclusive club, which runs $65 for a Gold membership or $130 for the prestige of an Executive membership. Through this membership, Costco makes money off you before you ever make your first purchase. As a result, the company can afford to price items at smaller margins than competitors.

If you've never stepped into Costco, you'll need a minute to catch your breath when you do, plus a bit of time to pick up the must-have items for first-time Costco shoppers. Then, it's off to the drinks section, where you'll find some of the beverage brands you're most familiar with at beer prices that may resemble a different decade. In addition to the membership fee enabling Costco to sell beer at smaller margins, the fee also puts the company in a better position to negotiate pricing with manufacturers. Because members pay into the club, Costco can better predict the number of customers it will have in the upcoming year. (The average grocery store without membership fees does not have this information and instead often relies on historical data to estimate foot traffic.) Manufacturers can then lower prices in favor of the volume Costco promises. One other Costco secret to keeping prices low lies in brand name, or maybe the lack of it.

Stocked alongside well-known brands, and almost always cheaper, is Costco's house brand, Kirkland Signature. The secret Costco keeps is that the manufacturers behind many Kirkland Signature products are established brands you'd recognize, but they aren't usually named on the packaging. Many Kirkland Signature spirits are produced by large, well-known distilleries around the world, and the same can be said for its beer and many of its other products. Because the manufacturer's name is invisible to the public, you benefit by getting a quality beer without paying for the costs that typically come with the brand name.

Kirkland Lager is produced by Deschutes Brewery, one of the largest craft breweries in the United States. While most Kirkland Signature products don't prominently name the manufacturer on the label, the Deschutes partnership actually featured co-branding that named Deschutes right on the beer's packaging — a rarity for the retailer. The lager is the recipient of beer industry awards that set it apart as one of the best lagers on the market.

Sadly, Costco recently announced the partnership with Deschutes was coming to an end. The company will buy out any remaining stock Deschutes may have but once the inventory is gone, Deschutes will not brew any more beer for Costco. Thankfully, the Costco membership means brand-name beers will continue to be priced at margins others cannot match. If Kirkland Lager is still in stock, pick that up along with some other recommended Costco beer favorites. You'll be surprised at how little you need to spend to stock up the beer fridge ahead of your next cookout.