As a savvy Costco shopper and self-proclaimed butter connoisseur, you know that the Kirkland Signature store brand consistently delivers on quality and value. From organic olive oil to aged balsamic vinegar, Kirkland products often rival or surpass their name brand counterparts at a fraction of the price.
One of the most popular Kirkland Signature offerings is also one of the most essential – butter. Whether you‘re an avid baker, a toast aficionado, or just appreciate a good butter, Kirkland likely has a permanent place on your grocery list. With a rich flavor, creamy texture, and attractive price point, Kirkland butter is hard to beat.
But have you ever wondered where this butter actually comes from? When you peek behind the Kirkland label, which dairy producer is responsible for this golden goodness? Today we‘re digging into the buttery mystery and attempting to uncover the maker of Kirkland Signature butter.
The Costco Connection
To understand Kirkland Signature sourcing, it helps to know a bit about Costco‘s history and business model. Costco was founded in 1983 in Seattle as a members-only warehouse club selling a limited selection of products in bulk quantities at rock-bottom prices.
Unlike traditional supermarkets or department stores that make money by marking up prices on a huge catalog of items, Costco keeps prices low by narrowing their assortment, buying inventory in massive volumes, and taking a very slim margin on each item – around 11%, compared to 25% at most retailers.
This strategy relies on loyal customers who shop often and spend more per visit to stock up on staples. "Costco‘s business model is to rent the space in the warehouse and generate traffic," explained Karen Short, retail analyst at Barclays. "They keep customers coming back by offering exceptional value on things they buy all the time, like toilet paper, soda, or butter."
To further boost value and drive customer loyalty, Costco introduced its Kirkland Signature private label in 1995. The Kirkland brand now accounts for about a quarter of Costco‘s total sales and spans over 364 individual products from wine to diapers to canned tuna.
The Case of the Private Label
So how does Costco decide which products earn the Kirkland badge? Kirkland Signature items are designed to be as good or better than the leading national brands, but priced 20% lower on average. To achieve this, Costco works closely with manufacturers who have the expertise and production capacity to meet Costco‘s rigorous quality standards and value mandates.
Many of these manufacturers also produce name brand products sold at other retailers. "About half of our products are what you might call ‘brand-name‘ products," Costco CFO Richard Galanti told CNN. "Those branded suppliers are the ones who make our Kirkland Signature items. They‘re the same manufacturers."
This arrangement allows Costco to leverage the knowledge and resources of established brands while maintaining the power to tweak product specifications and secure the best prices. "Costco has a great deal of control. It‘s their product, and their idea," said Jan Benedict Steenkamp, professor of marketing at UNC‘s Kenan-Flagler Business School. "Costco will put certain requirements in the agreement with the manufacturer about the ingredients and benefits of the product."
However, most of these partnerships are a closely-guarded secret. Costco keeps their Kirkland suppliers under wraps to protect the low wholesale costs they‘ve negotiated. If shoppers knew that Kirkland peanut butter was actually made by Jif, for example, they might just stock up on Jif when it‘s on sale at their local supermarket instead of trekking to Costco.
Suppliers also tend to stay quiet about their private label contracts to avoid disrupting sales of their own brand-name products, which are often priced higher than the Costco equivalents. According to one food industry consultant, "Making products for Costco under the Kirkland brand is a way for manufacturers to benefit from Costco‘s strong growth without necessarily having their own brands cannibalized."
Despite this veil of secrecy, the makers behind some famous Kirkland products have been revealed over the years – whether via industry insiders, store employee leaks, or clever detective work by consumers and reporters. A few examples:
- Kirkland Signature Extra Virgin Olive Oil = Partanna, a Sicilian company
- Kirkland Signature House Blend Coffee = Starbucks
- Kirkland Signature Organic Canned Tomatoes = Muir Glen
- Kirkland Signature Organic Coconut Water = Harmless Harvest
- Kirkland Signature Vodka = LeVecke Corp (rumored)
- Kirkland Signature Puppy Food = Diamond Pet Foods (confirmed by recall)
So while Costco may stay mum about the dairy producer churning their Kirkland butter, we can make an educated guess by looking for clues in product specifications, regional hints, and the broader butter business.
The Big Butter Business
Americans love their butter. The average U.S. consumer eats 6.2 pounds of butter per year, up from a low of 4.1 pounds in 1997. In total, the U.S. produced 2.1 billion pounds of butter in 2020, with California, Wisconsin, and Idaho leading the pack.
The U.S. butter market is dominated by a few major brands, many of which have been in business for nearly a century:
-
Land O‘Lakes: Founded in 1921 in Minnesota, now a massive farmer-owned cooperative with $14 billion in annual sales. America‘s best-selling butter brand.
-
Challenge Dairy: California-based cooperative established in 1911. Known for its iconic "elk" logo. One of the top butter brands in the West.
-
Tillamook: Oregon farmer-owned co-op dating back to 1909. Makes premium extra-creamy butter and cheese sold nationwide.
-
Grassland Dairy: Family-owned operation in Wisconsin founded in 1904. Largest independent butter producer in the country.
-
Keller‘s Creamery: Butter brand of Dairy Farmers of America (DFA), a huge Kansas City-based milk co-op. Sold primarily in the Midwest and East Coast.
However, the butter market has seen some shifts in recent years with the growth of private label. According to Euromonitor, private label penetration of the U.S. butter category jumped from 33% to 37.5% between 2011-2016. During that same period, the overall butter category grew 31% to $4.5 billion, suggesting that store brands are winning over customers.
"Private label keeps gaining share in the butter and dairy aisle," said Jonna Parker, principal of IRI‘s Fresh Center of Excellence. "Retailers are prioritizing their own brands not just as a value offering, but as premium products that compete with or surpass the quality of big brands."
Grading the Butter
To evaluate the potential makers of Kirkland butter, it‘s important to understand how the quality and flavor profile of butter is assessed in the industry. In the U.S., butter is graded based on its flavor, body, color and salt content according to USDA standards. The three main grades are:
-
Grade AA: The highest grade, with a "fine and highly pleasing butter flavor." Must earn a score of 93 out of 100 points based on lab testing and expert graders. This is the grade you want for a dinner party or special occasion.
-
Grade A: Lacks the "fine" flavor of Grade AA, but still has a "pleasing" flavor. Must score 92 points or higher. Totally acceptable for everyday use and cooking.
-
Grade B: Noticeable defects in flavor and texture. Scoreless than 90 points. Rarely found at retail, mostly used for commercial food production.
Both Kirkland Signature Salted and Unsalted Butter are USDA Grade AA, putting them in the top tier of the butter pyramid. In addition to the voluntary USDA grade shield, Kirkland butter foil also features the Real California Milk seal, which indicates that 100% of the butter was made using milk from California dairy farms.
Like most standard American butter, Kirkland butters are 80% milkfat, with the salted variety adding about 2% salt. European-style butter has a higher fat content (82-86%) for an even richer taste and softer texture.
The butter is sold in individually-wrapped quarter-pound sticks packaged in a 4-pound box. These are sweet cream butters churned from pasteurized cream "derived from milk from cows not treated with rBST," a controversial growth hormone that increases milk output.
Based on its specifications, taste, and texture, Kirkland butter is very similar to the "private label recipe" butter produced by Challenge Dairy, a major supplier to store brands on the West Coast. In fact, the Kirkland Unsalted Butter won the gold medal for best store brand butter at the 2018 Los Angeles International Dairy Competition, beating out other California heavyweights.
The Cream of the Crop
After churning through the evidence, dairy industry experts believe there are two frontrunners for the maker of Kirkland Signature butter: Hilmar Cheese Company and Grassland Dairy Products.
Hilmar Cheese Company is a massive California-based dairy manufacturer focused primarily on cheese and butter for private label and industrial clients. They source milk from over 200 dairy farms in the Central Valley and churn out over 2 million pounds of butter per day at peak capacity. Hilmar sells bulk butter to major brands, retailers, and restaurant chains across the country.
With plenty of cream supply, high-volume production capabilities, and a location near Costco‘s west coast distribution centers, Hilmar checks a lot of boxes for a potential Kirkland partner. "Hilmar has the scale, the sourcing, and the quality assurance to take on a contract like Costco," said John Crawford, a dairy procurement specialist. "They could dedicate a whole line of production to keep Costco in butter without breaking a sweat."
Another likely contender is Grassland Dairy Products, a family-owned butter producer based in Wisconsin. Churning since 1904, Grassland now makes about a third of the nation‘s total butter supply from its state-of-the-art facilities. While Grassland sells some of its output under its own brand labels, over half of the company‘s business is manufacturing butter for store brands.
"Grassland is a major behind-the-scenes player in the U.S. butter market," said Bob Bradley, professor emeritus of Food Science at the University of Wisconsin-Madison. "They have a reputation for making great butter for a variety of private label customers."
Grassland butter has a distinctively rich and creamy flavor thanks to its use of rBST-free milk and a special churning process that retains more butterfat. These premium touches make Grassland a good fit for the high standards of the Kirkland Signature label.
The Final Churn
So what‘s the verdict? Is Hilmar or Grassland the creamery behind Kirkland Signature butter? The truth is, we may never know for sure. Costco remains tight-lipped about their private label partnerships, and the dairies involved have every incentive to stay quiet too.
At the end of the day, the maker of Kirkland butter is a bit of a moot point for Costco shoppers. The real question is the quality of the product, not the name on the factory. And based on rave reviews from bakers, chefs and butter aficionados, Kirkland butter clearly makes the grade.
Whether spread on a rustic sourdough, melted into a sauce, or creamed into a cake batter, Kirkland Signature butter has earned its place as a staple in kitchens across the country. As long as it continues to churn out consistent taste and performance at a budget-friendly price, Costco fans will keep reaching for that blue and white box – no matter whose cream is inside.
