Costco has built its reputation on a simple premise — offer members high-quality products at competitive prices.
From groceries to household goods to its popular private-label Kirkland Signature line, Costco’s success depends heavily on consumer trust.
Shoppers often buy in bulk because they believe Costco has already done the work of carefully selecting products that meet certain standards.
That makes product selection one of the company’s most important responsibilities. A mistake involving a single item could garner outsized attention because Costco members expect quality.
A recent lawsuit involving protein powder highlights why Costco is typically cautious about the products it places on its shelves.
Though it would be premature to say that Costco risks losing members over a single legal battle and product issue, it highlights the risks the company faces when a popular item becomes the subject of safety concerns.
Costco faces lawsuit over protein powder
Costco is facing a proposed class-action lawsuit alleging that it sold Orgain Organic Plant-Based Protein Powder that contained undisclosed levels of heavy metals, including lead, cadmium, and arsenic.
The lawsuit, filed in federal court in Washington, claims Costco failed to warn consumers about the ingredients. Worse yet, the product was marketed as “high quality, clean, and nutritious,” which some say is deceptive.
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“As a major national retailer with sophisticated supply-chain management and quality control processes, Costco knew or should have known about the heavy metals,” the lawsuit said.
The allegations have not been proven in court, and Costco has not publicly commented on the allegations reported in connection with the lawsuit.
An Orgain spokesperson said, “While trace amounts of substances that occur in the environment can be present in plant-based ingredients, our products comply with applicable food safety standards and guidance,” reported The Guardian.
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Product quality issues are rare for Costco but problematic
Costco has spent decades building loyalty through its membership model, curated product selection, and emphasis on value. And the retail giant’s ability to quickly remove or address problematic products has historically been an important part of maintaining customer confidence.
Still, Costco works to avoid quality issues in the first place whenever possible.
The company’s business depends on members believing that the items available in its warehouses have already passed a careful review process. A challenge involving a food or related product can create questions about how suppliers are evaluated and monitored.
Furthermore, while the protein powder involved in the lawsuit is an Orgain product rather than a Kirkland Signature item, the controversy still matters because a big part of Costco’s success is its store brand’s reputation.
If customers can’t trust the products Costco brings in, that could trickle down to the Kirkland name, too.
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Of course, a single incident like this is unlikely to undo years of trust-building on Costco’s part. But if anything, this shows why Costco’s limited inventory model is so crucial.
Unlike most grocery stores, which can easily carry 30,000 or more SKUs (stock-keeping units), Costco typically limits its SKUs to about 4,000. This allows the company to have a better eye on quality.
That doesn’t mean Costco won’t have the occasional slipup. But it proves that Costco is smart to focus on quality over product quantity.
Maurie Backman owns shares of Costco.
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