How Costco built its $56 billion Kirkland store brand that’s bigger than Nike and Coca-Cola

When you walk into a Costco Wholesale warehouse, you can buy a Kirkland Signature dog bed, Kirkland pork chops, Kirkland men’s underwear, and even Kirkland Signature rosé. In fact, you can find some 550 highly disparate items under the Kirkland label, Costco’s massively popular store brand.

While it’s rare for a single brand to encompass such a diverse range of products and categories, Kirkland stands out. Its success lies in the shared characteristic of its items: They are all lower-priced products that match the quality of national brands. What's more, Costco (No. 11 on the 2024 Fortune 500) has been meticulous in ensuring that each addition to the Kirkland line-up reinforces its reputation for value and quality, positioning Kirkland as a national brand in its own right.

“We don’t just put our name on products that someone else makes,” explains Claudine Adamo, Costco’s chief of operations for merchandising. "Any new item goes all the way to the CEO’s office for sign-off."

That discipline and rigor have paid off handsomely for Costco. Kirkland-brand items generated $56 billion in revenue for Costco last fiscal year, or 23% of its business. If Kirkland were a standalone company, this level of sales would make it larger than Nike, Coca-Cola, and United Airlines. If you include Kirkland gasoline, you can add another $24 billion to the sales total. (Nike took in $51 billion last year, while Coke had revenue of $46 billion.)

According to the 2023 book The Joy of Costco written by David and Susan Schwartz, the top Kirkland brand items by sales in 2022 were toilet paper ($1.4 billion), paper towels ($1.2 billion), and bottled water ($730 million).

In the years before Kirkland, Costco’s private label items were divided among an unruly assortment of 30 different store brand names like Simply Soda or Chelsea toilet paper. In 1995, Costco cofounder and former CEO Jim Sinegal, inspired by a Forbes article on branding, decided to create a single, unifying brand called Kirkland Signature, named for the Seattle suburb where Costco’s original headquarters were located. Costco today is based in Issaquah, Wash., but that name would have been a mouthful for most people, in Sinegal’s view.Walmart Inc.’s Sam’s Club, Costco's closest direct competitor, followed suit in 2017, merging 20 store brands under the label Member’s Mark and also saw a sales lift.

The first Kirkland items were vitamins, to which hundreds more items have been added. In the last year, Costco has expanded to Kirkland cat food, garlic shrimp, barbecue grills, and golf balls.

A key ingredient to Costco’s success has been offering shoppers a limited selection of merchandise rather than overwhelming them with choices. All told, Costco shelves hold 3,800 different items. For an item like toilet paper, shoppers are offered a national brand or Kirkland Signature and two sizes for each.

Costco treats the identities of the manufacturers behind Kirkland products like a state secret. But it is known that Starbucks makes some Kirkland coffee, while Duracell, Huggies’ parent Kimberly-Clark, and Ocean Spray also reportedly produce Kirkland items incognito. Although those suppliers are household names, they still make goods for Kirkland because Costco is too big a revenue stream to ignore.

Wall Street analysts are bullish on the Kirkland brand, believing that Costco has the potential to significantly expand its product offerings. They argue that Costco has built a strong foundation of trust with consumers, which can serve as a springboard for further growth. “They've established that trust, and they can continue to grow,” says Joe Feldman of Telsey Advisory Group.

Adamo, Costco's chief merchant, doesn't think the retailer needs to increase its assortment of Kirkland food items but sees room for non-grocery items. And whatever does get added will be held to the same standards that have propelled the brand to its iconic status among consumers, she says.

“You’re building a trust factor with the quality and value. You’re building loyalty with that brand."

This story was originally featured on Fortune.com