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Costco Looks To Local Vendors To Increase P.R. And U.S. Mainland Revenue

Company seeks products that will generate 90% sales in their respective categories


October 23, 2003
Copyright © 2003 CARIBBEAN BUSINESS. All Rights Reserved.

Costco met Tuesday with more than 60 local manufacturers representing various industries during the Puerto Rico Products Expo, where they discussed available product purchasing & export opportunities that might increase Costco’s annual $30 million in revenue.

This was the second event coordinated under the Puerto Rico Industrial Development Co.’s (Pridco) new promotion & marketing program, "Fomento Promueve lo Nuestro" (Pridco Promotes Our Products). The program promotes tax deductions for nonlocal companies that purchase local products through export Laws 110 & 169 and agriculture Law 167.

Roger Campbell, Costco’s southeast region vice president & general manager, told CARIBBEAN BUSINESS he is seeking local suppliers whose products can join the select few in each category sold in Costco stores.

"Costco is for people who want to purchase quality items at inexpensive prices," said Campbell. "Our stores generally carry around 4,000 items, whereas other discount stores might offer more than 50,000.

"The obvious difference is our premise that our buyers study a product line’s bestsellers and choose the two or three that represent 90% of the sales in that category," added Campbell. "We don’t sell items whose names aren’t recognized [in their particular category]. That way we avoid having to educate consumers, and can concentrate on selling."

Costco began sending buyers to study the Puerto Rico market about a year before the opening of the Caguas location, the company’s first local store. According to Campbell, buyers also met with U.S. mainland suppliers serving the island, such as Procter & Gamble, to learn about local clients’ purchasing history. Even after opening another two stores in Puerto Rico (one in Bayamon and the third in Carolina), Costco buyers still come once a month to spend time with local vendors.

"We offered to come to the [the Puerto Rico Products Expo] and bring about 20 people—executives, buyers, and assistant general managers—to open a professional and open communication process," said Campbell. "As we organized the event, we saw that many of the suppliers are already local vendors interested in exporting their goods to our U.S. mainland stores. With local sales at more than $30 million, compared with an average $100 million stateside, we expect sales to continue rising."

According to Campbell, Costco is already buying 65% to 70% of its items locally; the company would like to compare how local products fare against Hispanic products on the U.S. mainland.

"We aren’t looking to buy a complete category," said Campbell. "We might meet a vendor and ask it to adjust one of its products to our market. The key is to give suppliers an opportunity to show us their products, compare them with those on the U.S. market, and determine where opportunities might lie."

Economic Development & Commerce (EDC) Secretary Milton Segarra said, "The Costco representatives’ visit to Puerto Rico is an extraordinary opportunity to expand our local manufacturers’ export business."

Pridco Marketing Director Daniel Nazario said local companies were ready to show Costco the excellent products they manufactured. Some are already Costco vendors. Martex, for example, exports mangoes to Costco’s northeast market, and Campofresco recently signed up to sell its juice products in Miami.

This Caribbean Business article appears courtesy of Casiano Communications.
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