(SND) - As one of the U.S. market’s dominant beverage alcohol retailers, Costco holds enormous sway in connecting consumers with drinks brands from across the industry. Annette Alvarez-Peters, the retail giant’s assistant general merchandise manager, beverage alcohol, addressed the 39th Annual Impact Marketing Seminar on March 19 to discuss the chain’s alcohol strategy.

Now the second-largest retailer worldwide with sales of $110 billion and 671 locations, Costco did $3.4 billion in beverage alcohol sales in its last fiscal year, ended in August. Alvarez-Peters noted that while Costco has grown exponentially since she joined the company in 1983, its merchandise philosophy has stayed largely the same. “We have a very limited selection, and 80% of sales are done with 20% of the items,” she said. “Our goal is to offer substantial savings on all items and constantly rotate in new products.” The smaller selection helps the company show a large variety of merchandise throughout the year while saving on inventory costs, she explained.

In beer, wine and spirits, Costco carries a total of 250 SKUs, with the majority of items in rotation, creating a “treasure hunt” atmosphere rather than appealing to brand loyalty. “We’ve found that our members are prepared to give up brand loyalty for a deal on another quality item. We buy items, not categories, wherein each item stands on its own,” Alvarez-Peters said, adding that margins are capped at 14% and a key objective is to trade consumers up. Costco’s Kirkland Signature private label brand represents less than 20% of the group’s beverage alcohol business, she added.

While noting that competition in the retail segment continues to increase, Alvarez-Peters expects Costco to remain true to its philosophy—and its beverage alcohol strategy to remain constant—looking ahead five or 10 years. “There’s always the temptation to add SKUs,” she said.