Why Kirkland Is the King of Generic Brands

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Shoppers know that Kirkland Signature makes products that offer quality at the lowest prices. Read on to learn why! 

When you think about generic brands, you probably think of lower-quality products with bland packaging. But there is one brand that defies these stereotypes: Kirkland, which is developed and sold exclusively by Costco. The popular warehouse retailer launched Kirkland Signature products in 1995, first starting with 30 different products. Since then, it has expanded to 350 products and now accounts for about $60 billion of Costco’s $222.7 billion annual revenue, almost a quarter of its sales.

How successful is Kirkland? It’s larger than Hershey, Campbell’s, or Kellogg. In fact, Nestlé, Procter & Gamble, PepsiCo, and Unilever are the only consumer packaged goods (CPG) companies larger than Kirkland. In comparison, Walmart’s private label, Great Value, is valued at $27 billion, less than half that of Kirkland Signature. Kirkland brand products are known for high quality and affordable prices, helping you keep more cash in your savings account. Here’s why Kirkland is the king of generic brands and what makes its products so great.

Quality

The secret behind Kirkland’s success is quality. Costco uses a rigorous quality control process to ensure that Kirkland products meet or exceed the quality of name-brand products. This is because many of the top national brands are also the third-party manufacturers for Kirkland Signature products, the only difference being the lower price and the distinct black, red, and white label and packaging.

Costco’s secret comes down to its meticulous selection process. This includes carefully selecting name-brand products that are not only popular with customers, but can also be sold at a discount of at least 20%. Costco then first offers these suppliers the opportunity to create a Kirkland brand product alongside their own. This unique approach allows Costco to provide its customers with a diverse range of high-quality and affordable options while building strategic partnerships with its suppliers.

For example, Kirkland Signature’s coffee is made by Starbucks, batteries by Duracell, and diapers by Huggies. In a 2019 talk at Georgetown’s McDonough School of Business, Costco co-founder and CEO Jim Sinegal stated that one of Costco’s goals from the start was to make Kirkland Signature’s products “equal or better quality than national brands.” Kirkland customers can rest assured that they are getting products that are just as good, if not better, than the name-brand versions.

Affordability

While Kirkland products are of high quality, they are also very affordable — in fact, there are many amazing Costco buys for under $20. In addition to its high quality, one of the other criteria that Costco set for the Kirkland brand was to save customers at least 20% off of the national brand. “And that wasn’t what the national brand would sell for in a department store or supermarket, but what the national brand would sell for at Costco,” Sinegal clarifies, providing even more savings for shoppers.

Kirkland items are priced significantly lower than their name-brand counterparts, making them a great value. For example, Kirkland’s Extra Strength Acetaminophen Gelcaps are $0.05 per capsule. In comparison, the cost of a comparable Extra Strength Tylenol® Rapid Release is $0.12 per capsule, more than double the cost. Duracell is the manufacturer of Kirkland Signature Batteries, yet a 48-count package of Kirkland Signature AA Alkaline Batteries costs $0.40 per battery. The same Duracell’s AA batteries are sold on Costco’s website at $0.52 per battery. By choosing Kirkland products, customers can keep their credit card bill in check without sacrificing quality.

Variety

According to its recent annual report, Costco stated that its focus is on “the key priorities of offering new items, providing cost savings and improving quality.” New Kirkland items included women’s jeans, reformulated dog food, sauté pans, BBQ pellets, fresh mini cakes, and chicken yakisoba.

Kirkland products cover a wide range of categories, from food and household items to clothing and tech products. This variety allows customers to do all their shopping in one place and saves them time and money. It’s also worth noting that Kirkland products often come in larger quantities than name-brand items (as they are sold in bulk), which can be great for households with larger families or for stockpiling.

Brand loyalty

Per Costco’s 2022 annual report, the “Kirkland Signature brand realized strong global growth” in 2022. Kirkland has developed a loyal following among those who are aware of the quality and affordability of its products. Many of these customers are so loyal that they will only buy Kirkland products. In 2021, the private label market reached a record $199 billion, with Kirkland’s loyal buyers making up almost 30% of it.

Kirkland has become more than just a product line. It has become a magnet that draws in customers and ensures they renew their memberships year after year. Experts have noted that having one consistent name has helped set Costco apart and establish a strong brand identity. It has played a significant role in cementing Costco’s reputation as a store that offers value without compromising on quality.

Customer satisfaction

Finally, Kirkland’s commitment to customer satisfaction is a big reason for its success. If a Kirkland product does not meet the customer’s expectations, Costco will refund or replace the item, no questions asked. This policy gives customers the confidence to try new Kirkland products knowing they can always return them if they are not satisfied.

Costco has disrupted the generic brand market with Kirkland by creating high-quality, affordable products that are loved by its customers. In addition, it also offers exclusive promotions and allows customers to save even more and earn Costco cash rewards with the Costco Anywhere Visa® Card by Citi. Costco has clearly established a winning formula that has made Kirkland the king of generic brands.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Citigroup is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has positions in and recommends Costco Wholesale, Starbucks, Visa, and Walmart. The Motley Fool recommends the following options: short April 2023 $100 calls on Starbucks. The Motley Fool has a disclosure policy.

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