Who owns Costco? From its historic merger with Price Club to becoming one of the top retailers in the world

Costco store

Costco, the multinational wholesale corporation, has been around for almost 40 years and has yet to dwindle in its extensive growth. Its employee-focused business model sets it apart from the other largest companies in the game and puts it in the public’s good books.

Though the retail giant does not believe in advertising, it has achieved just as well without much PR tactics since it was founded.

Key Takeaways

  • Costco was founded by Jim Sinegal and Jeffrey Brotman in 1983 in Seattle.
  • Price Club and Costco merged in 1993 to form PriceCostco and the company later came to be solely known as Costco.
  • Costco’s co-founder and former CEO, Jim Sinegal, stepped down as CEO in 2012 after serving for 27 years.
  • The current CEO and president of Costco is Walter Craig Jelinek.

Jim Sinegal and Jeffrey Brotman founded the first store of Costco in 1983

Jim Sinegal and Jeffrey Brotman
Jim Sinegal and Jeffrey Brotman founded the first store of Costco | France Freeman/Costco

On September 15, 1983, James “Jim” Sinegal and Jeffrey H. Brotman opened the first Costco store at 4401 Fourth Avenue Street in Seattle. The duo had raised $7.5 million from investors in San Diego and Northwest to start their retail venture.

According to Seattle Business, Costco’s first store on Fourth Avenue also operated as the company’s corporate offices before being relocated to Kirkland in 1987. In less than six years, Costco’s growth from zero to $3 billion in sales was an anomaly in the merchandising business.

The 1993 merger of Costco and Price Club gave birth to ‘PriceCostco’ and the company later dropped ‘Price’ from its name

In 1993, Costco announced its merger with one of it’s known rivals, Price Club, in a historic move. Price Club had earlier declined a merger offer from Wal-Mart’s subsidiary Sam’s Club. Sol Price told Fortune Magazine that while they were “good at innovating”, they “weren’t so good when it came to expanding and controlling” and that was where Costco came in.

While Costco’s President Sinegal became the president and chief executive of “PriceCostco”, Price Club’s co-founder and chairman Robert Price became the chairman of the combined company. In a statement reported by Los Angeles Times, Price and Sinegal said;

“This merger will allow the new company the opportunity to create greater operating efficiencies, which mean lower prices for our members. While aggressively pursuing club expansion in North America, the new company will take advantage of international business opportunities and maintain merchandise entrepreneurial leadership.”

The combined company raked in annual revenue of $16 million in sales and operated in 206 locations. However, disagreements ensued between Sinegal and Robert Price, leading to a partial breakup of the merger in July 1994. Funding Universe wrote that eventually Price exited the company and Jeff Brotman succeeded him as the chairman,.

In 1997, PriceCostco officially changed its name to Costco Companies, Inc. and rebranded the existing Price Club stores as Costco.

Co-Founder Jim Sinegal served as the CEO of Costco for 27 years and is responsible for Costco’s employee-friendly work environment

Jim Sinegal
Costco co-founder Jim Sinegal | Photo by Saul Loeb/AFP via Getty Images

As the founder and later the CEO of Costco, Sinegal’s career at the company spanned 35 years including 27 years as chief executive. He was notable for taking only a third of an average CEO’s salary ($1 million) at $350,000 a year, as per The Washington Post.

“I’ve been very well rewarded. If you’re going to try to run an organization that’s very cost-conscious, then you can’t have those disparities. Having an individual who is making 100 or 200 or 300 times more than the average person working on the floor is wrong,” he told The New York Times about his comparatively low salary.

While he led a sparing lifestyle which was unexpected for the CEO of such a huge corporation, he was generous with his employees. During his tenure as CEO, Costco covered 90 percent of the employee’s health care expenses.

Later, when he realized that his employees were paying more than 10 percent of the cost, he reimbursed the extra expenses and also added stock in their 401(k) plans in 2008. Employees at Costco enjoy fair wages and rewarding benefits compared to other stores in business.

Further to employees being treated well, Sinegal focused on customer welfare as well. He was insistent on maintaining the price of products at 14-15 percent markup and was of the view that Costco could not afford to mark up its prices in case the company fails to maintain customers, sharing that they “want to build a company that will still be here 50 and 60 years from now”.

“When I started, Sears, Roebuck was the Costco of the country, but they allowed someone else to come in under them. We don’t want to be one of the casualties. We don’t want to turn around and say, ‘We got so fancy we’ve raised our prices,’ and all of a sudden, a new competitor comes in and beats our prices,” he said.

According to The New York Times, though the Wall Street analysts disagreed with Sinegal’s “overtly generous” business strategy with his customers and workers, Sinegal stated that Costco’s high wages and benefits to employees were “not altruistic” but rather “good business” as the company enjoyed extremely low turnover rate and theft by employees.

Jim Sinegal stepped down as the CEO of Costco in 2012 and completely retired from the company in 2018

Jim Sinegal, co-founder and former CEO of Costco | Photo By Harry E. Walker/Tribune News Service via Getty Images

On New Years’ Eve in 2011, Jim Sinegal officially retired as CEO in favor of Walter Craig Jelinek, Costco’s then-president and chief operating officer, who had been a part of the company since a few months after the first store opened in 1983.

As to why he decided to step down, in a 2011 interview with The Seattle Times, Sinegal asserted that though he was “very attached to the company” and “love it”, there was no better timing to retire. He elaborated;

“In a perfect world I might have said, “Hey, I’d really like to work until I’m 80”. But there are no guarantees in life. There’s no guarantee of my health; there’s no guarantee that the team is going to be as set as I think they are [now]. Things could go wrong in one fashion or another. So, I feel a lot better about doing it at a point in time when that’s set perfectly in place.”

He further explained that the company would be in his successor Jelinek’s capable hands.

“[Jelinek] understands this business backwards. He understands it better than I do. He’s hardworking, he’s intelligent, he’s well-liked, he’s respected, he’s fair-all the things you want from a manager,” assured Sinegal.

However, Sinegal had not entirely relinquished his duties as he did remain as the advisor and member of the board, that is until 2018. Following the death of co-founder and board chairman Brotman in July 2017, Sinegal also retired from the board and the company in January 2018.

“It’s time…I’ve served for a long period, and I think that the company is in very good hands,” Sinegal told his shareholders, according to a 2018 The Seattle Times article. Though Sinegal may have severed formal ties with the company, he nonetheless owns a huge stake at Costco.

“I feel very confident, and I’m still a big shareholder and will remain a big shareholder,” said Sinegal about his departure. In a fond statement about Sinegal’s farewell, Jelinek said that while they “love him dearly” and will miss him, he is “not going to be far away”.

Walter Craig Jelinek succeeded Sinegal in 2012 and is the current president and CEO of Costco

Walter Craig Jelinek
Walter Craig Jelinek, The current President and C.E.O of Costco | Photo by Ken Lambert / The Seattle Times

W. Craig Jelinek, as the president and chief executive of the company since 2012, continues to uphold the principles of Costco set forth by his predecessor about putting employee and customer welfare first.

In an interview with The Seattle Times, when asked about whether Costco will heed the Wall Street advisors and cut back on employee wage and benefits, Jelinek responded;

“Nothing changed about the way we did business. We just stayed to our principles – it’s what we do, take care of customers and employees and the people who are selling us merchandise, because it’s important that your suppliers make money.”

He justified that to run a business for the long term, one needs to take care of employees and customers or else “bad things are going to happen to [the business]”. Today, according to Forbes, Costco is experiencing steady growth under Jelinek’s management and had also opened its first-ever Chinese store in Shanghai in 2019.

Current developments in the company include the promotion of Ron Vachris, former executive vice president and chief operating officer, to the post of president and member of the board on February 2, 2022. According to Bloomberg, this signals a succession plan for CEO Craig Jelinek.

Besides, Jelinek had followed a similar career trajectory where he previously served as president and COO before becoming a CEO, reported the Supermarket News. Also, Simeon Gutman, an analyst at Morgan Stanley, wrote;

“This is not an official announcement of a CEO succession plan, but it implies a plan is taking shape. It almost certainly paves the way for Mr. Vachris to succeed current CEO, Craig Jelinek. If Vachris is appointed CEO, he would be the third CEO in Costco’s history.”

Read: Who owns Family Dollar? Start Here