From collecting carts in the parking lot to managing one of the most dynamic categories in the store, Chad Sokol has had a varied career at Costco Wholesale Corp. Sokol began at Costco in 1993 as a part-time seasonal employee, splitting his time between pulling in shopping carts from the parking lot and working as a cashier. From those humble beginnings, Sokol has risen to become Costco’s assistant vice president and general merchandise manager for beverage alcohol, leading a billion-dollar category that continues to grow.
Sokol took over the beverage sector at the end of 2019 when Market Watch Leader Annette Alvarez-Peters retired. “I feel very strongly about creating excitement and innovation,” Sokol says. “I’m fortunate to come into the alcohol department at a time when momentum is strong and we have a good reputation in the industry. We will continue to focus on quality, value, and limited SKU offerings. Our liquor department sales are still maintaining strong growth.”
Overall, Costco had a banner year for beverage sales in 2020. The big-box company’s total global alcohol sales topped $5 billion last year, up from $4.8 billion in 2019. Costco’s total company-wide sales last year were $163.2 billion. Wine dominates the drinks business at Costco, comprising 50% of total beverage sales, followed by spirits at 30% and beer and RTDs at 20%. Globally, Costco has roughly 800 stores, with 559 in the United States and Puerto Rico. In all, 455 Costco locations sell wine, 337 sell spirits, and 496 locations sell beer and RTDs.
“Alcohol sales were very strong in 2020 and we’re continuing to see healthy double-digit increases,” Sokol says, “Right now, the liquor department is enjoying some of the strongest growth among the entire food side of Costco and we should finish fiscal 2021 in solid double-digit growth. We’re hopeful that we will continue to maintain some of the market share we’ve picked up over the last year.”
Despite his first year at the helm of the department being met with a global pandemic and a sharp shift in consumer shopping patterns, Sokol navigated the challenges and helped Costco’s alcohol sales grow rapidly last year. For his steady leadership in a time of great upheaval, Sokol has been named a 2021 Market Watch Leader.
Sokol began working at Costco in 1993 in Modesto, California. He says he was attracted to the company early on because of its flexible scheduling and dedication to offering quality items at value-driven costs, and he spent the first decade of his career at Costco working in various warehouses to learn the merchandising side of the business. After graduating from University of California, Berkeley, in 2004, Sokol moved to Northern California and shifted gears to the buying side. He worked in several departments within Costco as a buyer, including beverage alcohol, frozen foods, dry grocery commodities, deli, cooler, candy, and tobacco. Sokol was promoted in 2017 to help oversee Costco’s cooler, freezer, and deli department, a job that relocated him to Costco’s headquarters in Issaquah, Washington. Two years later, he was named the helm of Costco’s beverage alcohol sector.
“I worked my way through all of the various departments within the food and sundries side of Costco’s business, originally as an order clerk, then as an assistant buyer and buyer,” Sokol explains. “About ten years ago, I was an assistant buyer in the Bay Area region and helped manage the liquor business in Northern California and at a few Costco locations in Northern Nevada. I’ve always been eager to work in new departments. My father worked in the beverage industry (in the distribution tier) and my grandfather was a bartender, so I’ve always had an interest in learning more about wine and spirits.”
Costco values education and when Sokol became involved in buying and management within beverage alcohol the company sent him to Wine & Spirits Education Trust classes in the Bay Area. The knowledge he gained there helped him navigate Costco’s wine and spirits buying. “I’ve really enjoyed working with companies of all sizes, from very small wineries and craft distilleries to large global producers,” he says. “I love that there’s a place for everyone in this department.”
Despite its size and global scope, Costco puts an emphasis on local and regional products and relies on its regional buyers to stock warehouses with the appropriate products to appeal to their shoppers. This is an effort Sokol continues to support. “We have strong leaders in the beverage department and I encourage our buyers to stay ahead of trends,” he says. “We have great regional buyers and we utilize their talents, along with our e-commerce team, to make sure we’re stocking items that work in each unique market. Costco has a good reputation in the industry and I hope to keep expanding our network of suppliers. I’m hopeful we will continue to find partners who can find creative ways to work with us as we continue to expand.”
The beverage department has always been a key area of focus for Costco’s management. Over the last decade, Costco has more than doubled its total alcohol sales, from $2.3 billion in 2010 to more than $5 billion in 2020. Sokol says growth has been steady nationwide and adds that it’s accelerating this year in states that are opening up and loosening restrictions after Covid-19 shutdowns. Hawaii has seen particularly strong increases over the last few months, he notes.
“Our overall beverage alcohol sales are definitely stronger than I expected since Covid-19 began, and certainly stronger over the last few months as we’ve started to cycle on last year’s growth,” Sokol says. “The biggest surprise to me is how long we’ve been able to sustain this strong growth. Other parts of our business that suffered last year are coming back strong right now and we’re definitely benefitting from the additional foot traffic as our members come in for non-food items and shop the beverage department.”
Gains have been seen throughout the beverage department, but Sokol says some of most notable areas showing growth include domestic fine wines and sparkling labels, as well as large-format 3-liter boxed selections and Costco’s private label Kirkland Signature offerings. Tequilas and whiskies, especially Bourbons and single-malt Scotch, are also surging, along with hard seltzers, RTD’s, and craft beers. There has also been increased interest in vermouths and cordials over the last 18 months as shoppers looked for products to develop their at-home cocktail bars during Covid-19.
“We’re seeing members trade up on price points,” Sokol says. “RTDs, both spirits- and wine-based ones, are growing as a category and we’ve been able to test many new brands in wines to our Kirkland Signature portfolio, including a few single-vineyard options, that have done well. Our members definitely respond to the increased frequency of new item rotations in the wine department. Our goal is always to have new offerings and the increase in sales growth helps to make that possible.”
Costco’s top-selling wines include Kirkland Signature Prosecco DOCG and Ti Point Sauvignon Blanc (each $7 a 750-ml.), while its fastest-moving spirits include Kirkland Signature American vodka ($13 a 1.75-liter) and Tito’s vodka ($29 a 1.75-liter). Kirkland Signature hard seltzer ($18 a 24-pack of 12-ounce cans) and Corona Extra ($25 a 24-pack of 12-ounce bottles) are RTD and beer category leaders. “We’re testing many new RTD’s and hard seltzers this summer, and we’re looking to create new versions of our wine advent calendars for winter,” Sokol says. “There will be several new wine and spirits advent calendars coming this holiday season.”
Costco entered partnerships with new wineries last year that had previously been hesitant to sell their products in the warehouse club, something Sokol calls an unintended benefit of the global pandemic. Covid-19 also helped boost Costco’s online beverage alcohol retail business. The company strengthened and expanded its online partnership with the delivery service Instacart into 17 states last year and added wine selections to the Gourmet Foods section of Costco.com for delivery in California.
Sokol is committed to Costco’s treasure hunt mentality, limiting SKU counts and frequently rotating selections in and out to encourage shoppers to buy something when they see it. On average, Costco warehouses stock roughly 160 wine SKUs, 50 spirits SKUs, and 20 RTD and beer SKUs. “Only having a few options for any given category, especially fine wine, encourages our members to try new items and is less overwhelming for consumers,” he says. “With the increased sales volume over the last year, we’ve had many rotations sell through much quicker than expected, which helps us achieve our goal of always having something new every time our members shop with us.”
Going forward, Sokol says the beverage department will remain a key destination within Costco and that he will continue to focus on over-delivering on quality and value while building excitement in wine, spirits, and beer. Domestic and international growth is planned for Costco, and Sokol adds that the company will open its first warehouse in Arkansas with wine, spirits, and beer this July.
“I’m focused on helping to lead the beverage team by encouraging more tests and trials,” Sokol says. “I’m a big believer in trying new products and not being afraid to fail. I’m hoping we can continue to be innovative, even as we grow and expand.”