Why Is Costco Opening Its Own Chicken Farm?

13 Dec 2018 08:30 1,917
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In fall 2019, Costco will open a chicken farming operation in eastern Nebraska. This venture will provide Costco with 100 million chickens, or 40 percent of its yearly chicken needs, allowing it to partially escape the American chicken oligopoly run by the likes of Tyson, Pilgrim's Pride and Perdue.

One of the brand's iconic products is the Costco rotisserie chicken. Costco sells about 60 million of them every year, but they're a loss leader. Costco sells these chickens at a loss sometimes up to 30 to 40 million dollars per year. The chickens are a lure to get customers in the door. They're placed strategically at the back of every Costco so customers might pick up other items along the way.

That's why Costco wants to keep the price so low.

The trouble is that chicken prices have crept up over the last 10 years and the industry is practically an oligopoly run by the likes of Tyson and Perdue. Costco like most American Grocers buys from these behemoth companies because there's no other option. But not anymore. In 2016 Costco announced its plans to open a chicken farming operation in eastern Nebraska. It will own the whole supply chain from baby chicks to feed to the final product. This operation will provide Costco with 40 percent of its yearly chicken needs about 100 million chickens.
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Why Is Costco Opening Its Own Chicken Farm?

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