Someone on the Motley Fool discussion boards wrote up an observation on how Costco is cornering the champagne market. Citing a friend who works at a large West Coast wine distributor, the writer details a failed transaction with Trader Joe’s, which, before Costco came along, would’ve been a big deal for the distributor. Costco buys large quantities of Veuve Cliquot at $28.00 per bottle and sells it to customers for $29.95. They have not been aggressive about asking for a lower price from the distributor. A typical store would pay $30.67 per bottle. Trader Joe’s asked for 2000 cases at $26.67 per bottle. This pricing would allow them to match Costco’s retail pricing (after delivery and other overhead costs). The distributor declined, but, before Costco, that would’ve been a super opportunity. If their biggest customer is willing to pay more, everyone else must too. The writer’s analysis is that Costco has a long term strategy to drive their liquor competitors out of the market. Competitors can’t afford the prices Costco is willing to pay, and Costco can easily match any prices competitors can make profit on. Costco, therefore, is developing the ability to dictate pricing on certain goods. That’s the power of their massive customer base and lower overhead.