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Originally published Saturday, February 2, 2008 at 12:00 AM

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Costco beers soon could sell in warehouses

Costco shoppers could soon see a new name in the beer aisle. The Issaquah company has received federal permission to begin selling its own...

Seattle Times business reporter

Costco shoppers could soon see a new name in the beer aisle.

The Issaquah company has received federal permission to begin selling its own brand of beers bearing the Kirkland Signature logo.

The Treasury Department's Alcohol and Tobacco Tax and Trade Bureau approved label applications for amber ale, pale ale and hefeweizen made in partnership with Gordon Biersch Brewing in San Jose, Calif.

But Chief Executive Jim Sinegal said during an interview Friday "there's a lot of work to do," noting that Costco is "months away" from introducing the craft-style brews. BrewBlog, an industry newsletter by Miller Brewing, reported the label-application approvals earlier this week.

Costco already sells Kirkland Signature wine, including two bottles of a 2005 Washington syrah from the Columbia Valley for $39.99, as well as a single bottle of a 2006 Pinot Noir from New Zealand for $16.89. Costco also sells private-label vodka and scotch, though not in such states as Washington, where the government controls packaged liquor sales.

"In the past, private-label beer hasn't worked," said Eric Shepard, executive editor of Beer Marketer's Insights, a trade newsletter in Nanuet, N.Y. "Beer, in particular, has been known to be a very brand-driven business, even more so than wine."

Store-branded beer accounts for less than 1 percent of the U.S. market, while Anheuser-Busch, maker of Budweiser, captures about half of the beer sold annually, Shepard said.

Retailers covet the higher profit margins of private-label products, but consumers historically have regarded them as downscale. Because Gordon Biersch makes craft-style brews, downscale is "not where Costco is going," Shepard said. "Craft brewers are something different ... with a premium, import-type image."

Trader Joe's for years has sold private-label beers in partnership with Gordon Biersch, including a Bavarian-style hefeweizen and Bohemian lager.

For now, though, Sinegal said it's too soon to talk about a Kirkland Signature brand of beers. Costco is still negotiating with Gordon Biersch, and prices are yet to be determined.

"To begin the process, we have to seek permission to sell the product. We've done that, and now we need to develop it," Sinegal said.

"We have hundreds of products that go through this process, and some never show up," he said. "Chances are, this will, but we're not there yet."

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com

Copyright © 2008 The Seattle Times Company

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