2010 Power 50: No. 10 Jim Sinegal

Jim Sinegal, the chief executive officer of Costco Wholesale Corp., ceded a bit of power this year — giving up the title of president — and at the same time he set up a process for a smooth management transition when he decides to retire.

Early in the year, Issaquah, Wash.-based Costco established an office of the president consisting of Jeff Brotman as chairman, Sinegal as CEO and Craig Jelinek as president and chief operating officer. (A fourth member of the office, Dick DiCerchio, retired during the year as senior executive vice president.)

“Though Jim is really the face of Costco, there are a number of strong, talented management personnel below him that help the company achieve the success it has enjoyed,” Brendan Langan, director of retail insights for Kantar Retail, Cambridge, Mass., told SN. “And like any good leader, Jim is doing succession planning to move the company along into the next generation.”

Interviewed by SN, Sinegal said he has no specific plans to retire.

Asked how Costco has weathered the recession, Sinegal said it has done so by establishing a strong identity for its private-label offerings under the Kirkland Signature banner before the economic downturn, so when members started looking for less expensive alternatives, they already knew what they could buy to save money without sacrificing quality.

“Developing a strong value proposition is what Costco is all about,” Sinegal said, “so we worked hard putting a program in place over the last couple of years, in advance of the downturn, that developed our private label as a quality brand.

“People don’t come in and shop off a fancy display — they come in for great products at great prices, and we’ve made sure we have those kinds of products at every turn.”

Even as CPG companies became more aggressive in the face of falling sales, “a $13.99 private-label liquid detergent is going to look a lot more attractive than a branded detergent for $22.99,” Sinegal pointed out.

As consumables, including food, have become a bigger part of Costco’s business, the company made some surprising discoveries as the economy sank, Sinegal said. For example, because many restaurants sell USDA Prime beef, and because restaurant business was down, Costco was able to get Prime beef at good prices.

“Which meant we could sell it at a good price that meshed with our value proposition, and it’s become an important part of our assortment,” Sinegal pointed out.

As the economy recovers, Sinegal said Costco plans to expand its fresh food selection to encompass more cheese and prepared meals.

Although new domestic growth slowed to only 15 sites in the current fiscal year, Sinegal said Costco anticipates opening 25 new locations next year, most in the U.S.