Costco serves notice on supermarkets with sales of $1.5bn Chief executive Patrick Noone is helping Costco make a killing. Picture: Phillip Rogers  By: Eli Greenblat  Publisher: The Australian  Date: December 30, 2016 US discount retailer Costco is breathing down the neck of established supermarket giants Woolworths and Coles after reaping more than $1.52 billion in revenue last year, generated by sales of everything from fresh fruit to coffins as Australians warm to its membership model. Since arriving in Australia in 2009, Costco’s booming business has seen it rack up nearly $5bn in sales, all won from established retailers such as the supermarkets, homewares, liquor and clothing stores. The US group’s warehouses draw a flood of new members whenever they open. Documents lodged with the corporate regulator and obtained by The Australian reveal Costco’s annual revenue rose to $1.52bn for the 52 weeks to August, up 15 per cent on $1.32bn booked in 2015. Costco has eight of its warehouses in Australia, meaning each one is pulling in an average of just under $200 million a year in sales, giving the group about 1.7 per cent market share of the nation’s $90bn grocery sector. Along with fellow invader, German groceries and general merchandise discounter Aldi, Costco is stripping customers from the domestic players with the offer of steep discounts on food, packaged groceries, clothing, wine and technology, with the US group also doing a good trade in coffins and petrol.Underlining the threat to Woolworths and Coles, Costco and Aldi combined are now drawing in annual revenue of $7.3bn — money lost to the supermarket giants and other retailers. But Costco Australia chief executive Patrick Noone said one category that has suffered over the past year was the once-roaring trade in infant milk formula, with the disappearance of the Chinese personal shoppers known as daigous who once stripped his shelves to send baby formula to China. “There was a lot of overseas trade the year before with milk exports to China … we did deal directly with the small entrepreneurs, the daigous, but that has now quietened down a lot,’’ Mr Noone said. Ructions in the export of infant milk formula to anxious mothers and wily entrepreneurs in China has been felt by the major producers, with shares in organic formula producer Bellamy’s frozen in a trading halt as it reassesses the impact of the downturn on its accounts. Meanwhile, Costco is powering ahead, with the recent addition of petrol stations at its warehouses drawing in more shoppers, who pay an annual fee of $60 to gain access to discounted prices. Costco’s parent, which has more than 500 stores in the US, Canada, Mexico, Britain, South Korea and Japan, has often described its Australian operation as one of its most successful overseas expansion stories. The accounts for Australia show its operating profit doubled to $20m, although its bottom line net profit dropped by half to $7.2m due to the impact of currency movements. Costco is pushing ahead with its expansion in Australia, with eight stores opened so far, a ninth being built in northwest Sydney and a 10th slated for Melbourne in 2017. “We are seeing a good growth in customer traffic now in every warehouse, but especially in Melbourne, where it has been very strong thanks to the recent third warehouse, and we are seeing good growth in our customer levels with that,” Mr Noone said. “We have had good growth over the last seven years and I think our members are coming to shop with us more frequently and are enjoying the experience, and giving a lot of confidence for us to expand our footprint in Australia.’’ It is believed Costco has more than 150,000 paid-up members. Source: http://www.theaustralian.com.au/business/companies/costco-serves-notice-onsupermarkets-with-sales-of-15bn/news-story/0d142e0ff1b195e3651d27f75c674841