Costco Switches Back to Italian for Private Label

Summary

Costco’s newslet­ter high­lighted its Kirkland Signature brand of extra vir­gin olive oil, empha­siz­ing the impor­tance of ensur­ing authen­tic­ity in a mar­ket plagued by fraud. The com­pany recently switched from Italian to Greek pro­duc­ers for its olive oil blend due to sup­ply issues, but ulti­mately returned to Italian oil based on cus­tomer pref­er­ence for per­ceived qual­ity.

In Costco’s August 2016 newslet­ter, the world’s sec­ond-largest retailer fea­tured a story about its Kirkland Signature brand of extra vir­gin olive oil. The olive oil cat­e­gory has moved front and cen­ter for the company’s food buy­ers in recent years, as inter­na­tional head­lines con­tinue to indi­cate an indus­try fraught with fraud and coun­ter­feit.

Large retail­ers like Costco who buy in bulk and may not have sys­tems in place to weed out phony oils are vul­ner­a­ble to sub­stan­dard prod­ucts. Costco’s Kirkland, how­ever, con­sis­tently receives high marks in con­trolled taste tests.

As recently as 2013, the United States Food and Drug Administration detained, and sub­se­quently refused, a num­ber of ship­ments from a major Italian olive oil pro­ducer, Certified Origins Italia, that was one of the resources employed by Costco for itsex­tra vir­gin olive oil imports.

Since then, in an effort to ensure its cus­tomers are get­ting high-qual­ity olive oils, Costco cor­po­rate food buyer Shauna Lopez said in the newslet­ter that the com­pany is crack­ing down and ​“recently took bet­ter mea­sures to ensure that only 100 per­cent authen­tic Italian extra vir­gin oil is sold at the ware­house. Costco is fully aware of this ille­gal sit­u­a­tion and has worked dili­gently to ensure its Kirkland Signatureextra vir­gin olive oil is authen­tic and trace­able.”

Citing the con­tin­u­ing prob­lem with olive oils being ped­dled by shady pro­duc­ers as extra vir­gin when test­ing has shown many are cut with cheaper stuff like palm oil, Lopez main­tained that the com­pany has estab­lished a strin­gent chain of qual­ity checks and bal­ances designed to deter­mine purity from grow­ers, millers, bot­tlers and importers.

Presenting its cur­rent processes as top notch, Lopez said the com­pany now works with the Geneva-based International Organization for Standardization (ISO), employ­ing its trace­abil­ity sys­tem to ensure the ori­gin, authen­tic­ity and safety of the Italian oils and to con­firm integrity through the sup­ply chain.

The newslet­ter, how­ever, makes no men­tion of the fact that a lit­tle more than a year ago, Costco switched entirely from Italian to Greek pro­duc­ers for its sig­na­ture­ex­tra vir­gin olive oil blend.

In March of this year, an On Olive Oil pod­cast fea­tured an inter­view by Olive Oil Times pub­lisher Curtis Cord with Chad Sokol, the com­mod­ity and dry gro­cery buyer for the company’s Northern California and Nevada stores. Sokol noted that the Kirkland Signature brand ofex­tra vir­gin olive oil was pur­chased and coor­di­nated through the cor­po­rate office and he echoed Lopez’ state­ments about the impor­tance of the cat­e­gory and the need for qual­ity checks and assur­ances.

“We inde­pen­dently test all prod­uct at every level and rely on third party audits for all the Kirkland Signature prod­ucts. We’re very hands-on at Costco. And what the bot­tle says, it bet­ter be that.” He went on to note that the com­pany had expanded the cat­e­gory by sourc­ing from Greece and, in Sokol’s region, from local grow­ers like California Olive Ranch as well.

Reached for com­ment on the Costco newslet­ter story, Sokol con­firmed that in April 2015 Costco cor­po­rate dumped their Italian exporters entirely in favor of resources in Greece, switch­ing back to Italian oil just this month.

The Kirkland two-litre, Italianextra vir­gin olive oil was ​“the main sales dri­ver for the past few years,” said Sokol. But sup­ply prob­lems, likely par­tially due to the Xylella fas­tidiosa blight that rav­aged Italian olive groves and trees by the mil­lions, and ris­ing prices for Italian EVOO, were rea­son enough to try an alter­na­tive prod­uct.

“Pricing was through the roof, so we decided to make the switch and change to 100 per­cent Greek oil for a year.” The label and cap were changed to dis­tin­guish the new blend, and the com­pany waited to see how con­sumers would respond to it ver­sus the Italian.

Within 14 months, the cus­tomers had spo­ken and, with prices com­ing back down, Costco went back to Italian. ​“It was what mem­bers wanted. They’re used to what they’re used to and there’s a per­cep­tion that Italianextra vir­gin olive oil is top-of-the-line. The Greek oil did OK — I myself pre­ferred it in a blind tast­ing — but it was not quite as strong a seller. And pulling our buy out of Italy was sig­nif­i­cant. Their pric­ing came down as a reac­tion, and that was our hope as well.”

According to Sokol, Costco’s goals include expand­ing the knowl­edge of its mem­ber base into EVOOs from Greece, Spain, even Tunisia going for­ward. And each region, like his, has the lat­i­tude to test and sell smaller-scale, local brands but, he added, ​“We have to be care­ful with such a big sales dri­ver. You don’t want to mess with it.”