In 2019, Costco will open a chicken farming operation in eastern Nebraska. This venture will provide Costco with 40% 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 Costco’s iconic products is the rotisserie chicken. The retailer 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 past 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.
Read the story at CNBC.
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