Costco: The Great Commoditizer of Wine Pt. IV

Costco has redefined the way Americans buy wine, but not necessarily for the better. As the second-largest wine retailer in the United States, with annual sales estimated at over $4 billion, Costco’s influence on the wine industry is undeniable. Yet this influence is rooted in a business model that treats wine as just another commodity—like toilet paper, in fact, as a Costco executive once remarked. Unlike traditional retailers, Costco’s profitability doesn’t come from selling products. Instead, it’s driven by memberships. With a markup of just 8–15% on wine (compared to the industry average of 30–50%), Costco positions itself as the place for bargain wine deals, creating a perception that wine should be cheap, abundant, and accessible.

This pricing strategy pressures producers to adapt in ways that often prioritize quantity over quality. Wineries that want to sell through Costco must scale their production to meet the retailer’s massive volume requirements, often at razor-thin margins. While this guarantees Costco shelves are stocked with reliable, mainstream wines, it leaves little room for niche producers or smaller wineries that can’t compete at this level. Over time, this homogenizes the selection, reducing the diversity of wines available and reinforcing a mass-market palate.

The impact doesn’t stop there. Costco’s warehouse environment strips wine of its mystique, presenting it alongside kayaks and household cleaning products. There’s no romantic narrative about terroir, winemaking traditions, or craftsmanship—just a black-and-white price tag with a rating and tasting notes. This approach erodes the emotional connection that wine enthusiasts often have with their purchases. A bottle becomes less about the story behind it and more about the savings.

Perhaps the most significant effect is on consumer expectations. Costco has trained its members to equate quality wine with low prices, setting a psychological benchmark that distorts value perception. Why pay $40 for a boutique wine from a local shop when Costco offers a well-regarded Napa Cabernet for half the price? While the savings may be real, this environment discourages consumers from exploring wines outside the safe, mass-market options offered by Costco.

Costco’s commoditization of wine ripples through the entire industry. Independent wine shops struggle to compete, unable to match Costco’s pricing while maintaining sustainable margins. Producers, too, are left with tough decisions: either scale up and sacrifice artisanal practices or miss out on one of the most lucrative distribution channels in the country.

But Costco’s model may have its limitations. In 2023, Total Wine & More surpassed Costco to become the largest wine retailer in the U.S., with over $6 billion in sales. This shift highlights the drawbacks of Costco’s approach. While Costco’s focus on low prices and high volume works well for a certain type of consumer, it fails to offer the personalized experience that many wine buyers seek. In contrast, Total Wine offers a broad selection of over 8,000 wines, along with knowledgeable staff and educational resources. This customer-centric approach has enabled Total Wine to capture a larger share of the market, showing that a more curated, experience-driven model can outperform Costco’s commoditized approach in the wine retail space—sans $1.50 hot dogs too.  I mention Total Wine to rebut those who may argue that, as a wine retailer, my beef (hot dog) with Costco is biased and self-serving.

At its core, Costco treats wine no differently than milk, eggs, or peanut butter. It’s just another commodity to stock at low margins to support its real business: selling memberships. While this approach has democratized access to wine, it has also come at a cost. The soul of wine—the artistry, the culture, the connection to place, what we have called somewhereness—is lost in the fluorescent-lit aisles of an exposed concrete-floored warehouse. Costco’s model may bring wine to the masses, but in doing so, it reduces Silver Oak Napa Valley Cabernet Sauvignon 2018 to just another SKU.