Costco looking to source new deals in the Australian market

Posted by AFN Staff Writers on 6th August 2012

With the opening of another Melbourne store set for late 2013, the retailing giant Costco’s commitment to using local Australian produce will see a demand for additional new suppliers. This is a welcome opportunity for Australian food businesses.

A substantial number of local producers are already benefitting from Costco’s arrival in Australia. For example, Costco’s highly commended beef is a grain-fed premium product coming out of Swift Australia’s Beef City feedlot in Toowoomba, Queensland. Meanwhile Baiada Poultry has been supplying its well-regarded Lilydale free-range chicken and Steggle’s fresh and crumbed poultry lines to Costco from the inception of the first Costco store opening in Melbourne in 2009.

The American supermarket giant has had a major impact in the Australian fresh produce market since opening its first store in Melbourne’s Docklands in 2009. This was followed by Canberra and Sydney stores opening in July 2011.

Frais Farm in East Gippsland is an example of a smaller producer who has developed with great success following big orders from Costco.

Costco has been sourcing breads and speciality baked products from a number of private bakeries, not only from Melbourne, but from regional cities such as Ballarat.

This support by Costco of Australian family-owned supplier brands has been a boon. Despite the product suppliers having supplied Costco with huge wholesale discounts, they seem to have been well compensated by the huge volumes that appear to clear quickly through the Costco stores.

The loyalty of Costco shoppers is unique, and stems from a mix of its club-membership loyalty system, combined with a shopping experience of many special offers, and a bevy of low prices that appear to be also attracting restaurants, cafes and wholesalers as high volume buyers.

There are now third-party internet-based businesses advertising their ability to deliver Costco-sourced products that can be ordered  from orders being taken online by the third-party.

The foreshadowed Costco opening of a huge store in Ringwood, an outer-eastern suburb of Melbourne, in late 2013 follows the initial Docklands arrival in 2009, and the opening of two stores in Sydney, another in Canberra, and a recent move into petrol as reported by Australian Food News.

Costco’s unique members-only customer model sets it apart from rivals Coles and Woolworths. Costco shoppers pay an annual membership fee (currently $60) to shop at Costco stores. Costco specialises in discount groceries and household goods in bulk but also has special high-value one-off offerings that certainly create shopping interest and make Costco a different kind of shopping experience for every visit.