Costco, Stewart team up for food

NEW YORK —Costco and Martha Stewart Living Omnimedia have struck a deal that will get Martha in the mass-market food business and pair another high-profile brand with Costco’s own Kirkland Signature label. Under the agreement, a line of fresh, refrigerated and frozen product under the Kirkland Signature by Martha Stewart name will roll out to clubs in 2008.

In a first-quarter conference call on May 3, Martha Stewart Living Omnimedia president and ceo Susan Lyne announced that the company had just inked a deal with Costco for a line of Martha Stewart co-branded products that will sell exclusively at the warehouse club.

“We’ve noted that our greatest untapped opportunity lies in the food category,” Lyne said during the call. “The challenge was finding a partner that shared our commitment to raising the bar for consumers and to ramping the business to its full potential.”

MSLO has a habit of breaking news about deals even as the ink dries and some program detail have yet to be fixed, according to Costco and MSLO sources. Diana Pearson, an MSLO spokeswoman, said on May 4, “We only this week have signed a contract. We don’t have a lot of clarity yet, as we’re at the beginning of this.”

Yet, some parameters have been established. Costco cfo Richard Galanti told Retailing Today that the Kirkland Signature by Martha Stewart line rollout would work similarly to other key co-branding initiatives Costco has launched, such as its program with Newman’s Own.

As currently envisioned, the program isn’t intended to include the kind of extensive, dedicated assortment that Kmart has operated as the exclusive outlet for Martha Stewart Everyday. Nor will Costco set up boutique-style merchandising. “We don’t have a Ralph Lauren boutique,” Galanti pointed out.

Still, the Martha addition is important to Costco as it continues to develop its successful Kirkland private label. “She’s got great brand recognition and a lot of following, including among our members,” Galanti noted.

Despite experience developing home furnishings and craft items, MSLO hasn’t translated Martha’s cooking expertise into a mass-market product line. Thus, Costco’s attractiveness as a partner might have been enhanced by how it has successfully developed the Kirkland brand and how it can help scale up ideas from Martha’s kitchen—and television set—for a continental production run. Galanti would not directly comment upon the advantages Costco’s know-how provides, saying only, “We can both help each other.”

The Costco deal is another element in an ambitious repositioning of the Martha Stewart Brand. MSLO is developing Martha Stewart Signature product line with Federated Department Stores and is rolling out the Martha Stewart Crafts line at Michaels. The Michaels introduction is part of a major move into the crafts space that also includes a sewing machine endorsement deal with Husqvarna Viking. MSLO has even added a sewing area to the set of Martha’s television show. Martha herself told Retailing Today that she is determined to bring sewing back as an important American hobby.