The $90 Billion Private Label Nobody Talks About

Kirkland launched in 1995. Jim Sinegal, Costco’s founder and CEO, issued a mandate that was not complicated and was not negotiable: any product developed under the Kirkland name must be of equal or better quality than the national brand alternative. Not close. Not competitive. Equal or better.

When Walmart and Sam’s Club private label executives heard about that standard they were openly skeptical. How do you meet that quality bar and still meaningfully differentiate on price? It was considered an either/or proposition. Sinegal and his team treated it as an engineering problem and solved it.

The mechanism is the manufacturer relationship. Costco never officially confirms who makes its products. Protecting that information is part of how the value perception holds. But Starbucks custom-roasts several Kirkland coffee varieties, printed directly on the packaging. Duracell produces Kirkland batteries, confirmed by former Costco CEO Craig Jelinek in a 2016 interview. The product meets the same specification as the national brand. The price is lower because the margin requirement is lower and the volume guarantee is larger.

Product developers and quality assurance specialists sometimes spend years perfecting a formulation before a Kirkland product reaches the shelf. Underperforming products are discontinued, not reformulated into mediocrity. Sinegal retired in 2012. The rule stayed. Today, every addition to the Kirkland line requires sign-off from CEO Ron Vachris personally. The standard was the founding decision. It is also the current operating principle.

The name itself was deliberate. Kirkland, Washington was the location of Costco’s former headquarters. It was chosen because it sounds like a place, not a company. The result is a brand that reads as artisanal at $90 billion in annual sales.

Kirkland is capped at up to 15% markup. The national brand next to it on the shelf runs at 25 to 40%. Most private labels win on price by compromising on quality. Kirkland wins on both. That is why the national brand is the one left explaining the difference.

What makes that possible is the membership fee. Membership fee income grew from $4.8 billion in fiscal year 2024 to $5.3 billion in fiscal year 2025. Total operating income that year reached $10.4 billion. More than half came from the fee before a single item sold. The membership is not a loyalty program. It is the margin engine that allows everything else to hold. Costco can hold Kirkland’s quality standard indefinitely because the income statement does not depend on product margin to function.

A national brand running at 25 to 40% markup has no equivalent buffer. Every price concession, every promotional spend, every reformulation cost comes directly out of operating income. The starting positions are not comparable and were never designed to be.

The difference becomes most visible under pressure. When inflation hit, a national brand chose between passing the cost to the consumer and risking volume, or absorbing it and compressing margin. Costco absorbed input cost increases at the product level and recovered them through membership renewal. The consumer did not feel it in the product price. US and Canada renewal rates held at 92.3% in fiscal year 2025. The national brand lost volume. Costco gained members.

Tariffs are producing the same dynamic. While national brands are managing tariff exposure through price increases, Costco is expanding Kirkland’s domestic sourcing and absorbing the cost. CEO Ron Vachris confirmed it on the Q2 2026 earnings call. The membership model makes that decision available. The national brand’s markup structure does not.

Every force currently compressing the American food industry runs through Costco’s model and comes out the other side as a reason to renew.

The US food system was built on a permission-first regulatory model. Under GRAS (Generally Recognized as Safe), a manufacturer can introduce an ingredient into the food supply without mandatory FDA review. The default is permission, not protection. The system optimized for speed, scale, and cost.

That is changing. The FDA’s spring 2026 regulatory agenda includes a proposed rule to eliminate self-affirmation entirely, requiring mandatory FDA review before any new ingredient enters the supply. When FDA officials were asked how many GRAS substances are currently in the food supply, they could not answer. The standard the US food system never built is now being legislated into existence. The floor is arriving whether the industry builds it voluntarily or not.

For decades that worked. Volume covered the gap. National brands spent on advertising instead of product development and the margin held because the consumer had no alternative standard to measure against.

That era is ending. Private label hit a record $282.8 billion in US sales in 2025, growing at nearly three times the rate of national brands. In Europe, private label accounts for 40% of retail food sales. In the US, 21%. That gap is the commercial outcome of two food systems with fundamentally different relationships to consumer expectation. Europe set the floor before the industrial food system scaled. The US let the industrial food system scale before the floor existed.

The club segment (Costco, Sam’s Club, and BJ’s) now accounts for 47% of all private label growth in the US. In April 2025, Target announced 600 new items across its Good and Gather and Favorite Day lines. Retailers are not waiting for national brands to close the gap. They are building their own floors. Costco built the blueprint in 1995. The rest of the industry is now copying it under pressure.

That is the cost of leaving the standard at the door. Someone else picks it up.

Private label accounts for 40% of retail food sales in Europe, 21% in the US, and just six percent across Asia Pacific. Asia is the lowest private label market on earth. Brand loyalty there runs deep and foreign retail formats have failed in Japan repeatedly. And yet Costco’s strongest per-location performance is in South Korea and Japan. Kirkland, a private label, is a trusted brand in markets that have historically resisted private labels. That requires an explanation.

The explanation is the standard. Kirkland did not ask Asian consumers to lower their expectations. It offered a product that met them at a price that made the membership worth having. The hardest markets became the best markets because the standard was built to travel.

Fortune reported that Costco’s Seoul location recorded the highest sales of any Costco worldwide. Twenty warehouses across Korea generate per-location volumes that routinely outperform markets many times their size. Korean consumers did not discover Costco and adjust their expectations downward. They arrived with standards already set and found a retailer that met them.

The UK confirms the pattern in a Western market with an established food culture and a sophisticated retail landscape. Twenty-nine locations. Expanding. Kirkland treated not as a discount option but as a quality choice.

Costco is opening half of its new warehouses outside the US, with Europe and Latin America alongside Asia. That is not diversification. It is confirmation that the model travels because the standard travels.

Costco built the largest CPG brand in America without a single national advertising campaign by deciding in 1995 what the standard would be and not moving off it for thirty years.

The national brand’s only defensible position now is what Kirkland structurally cannot commoditize: provenance, origin, a story specific enough that no warehouse club can put it in a house brand. That ground exists. Most brands are not standing on it.