Vertically Integrating Chicken Feed at Costco

Costco sells over 100 million rotisserie chickens annually. These irresistible birds have become an indispensable staple in many households across America.

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Behind every cheap, cherished chicken lies a tragic tale of industrial animal farming. An undercover investigation at one of Costco’s Lincoln Premium Poultry farms revealed sick, cramped conditions where many birds were forced to grow unnaturally large quickly, some dying of heart failure on floors littered with their own waste.


Costco’s $4.99 Rotisserie Chicken

Rotisserie chicken has long been seen as the star of grocery store menus–she is versatile enough for soup, salad and even just eating straight up, affordably priced ($4.99 for an entire bird that’s larger than most), consistently delicious and consistently versatile.

Although global food prices have skyrocketed in recent years, Costco’s signature rotisserie chicken remains at $4.99–beating inflation and pandemics in its affordability. But why?

Costco uses low prices as an entryway into their stores, with the hope that once inside they will buy other items as well. CFO Richard Galanti admitted during 2015 earnings call that Costco was losing up to $40 million per year by not raising prices of its rotisserie chickens despite customer demand; but he maintained it was worthwhile given their value proposition to customers. They’ve even invested in their own vertically integrated chicken plant in Fremont, Nebraska in order to control production costs and maintain constant pricing.

Costco’s Vertical Integration

Costco’s $4.99 rotisserie chicken is one of its signature offerings, yet with rising costs for poultry feed it has struggled to maintain this price point. As such, Costco is looking for ways to minimize supply chain disruption risk and enhance profitability through vertical integration.

Fremont, Nebraska will soon become home to Costco’s 400,000-square-foot facility featuring hatcheries, feed mills and processing plants that will save them 35 cents per rotisserie chicken while also supporting local economies and satisfying an ever-increasing consumer demand for organic poultry products.

Critics argue that the plant puts farmers’ finances at risk. They must pay for new barns to hold the birds, which might rely on Costco purchasing them instead. Furthermore, their exposure to odors and potential water contamination by the plant may pose health hazards and further decrease farm jobs.

Costco’s Antibiotic Use

Consumers are concerned about antibiotic resistance and increasingly demand “clean meat”. In response, major restaurants have implemented policies restricting antibiotic usage; Whole Foods Market in particular requires all chicken raised without medically important antibiotics to be raised at their farms; Kirkland Signature chicken from Costco was already raised without these medications however the company has not made similar commitments with any third party suppliers.

Costco recently responded to As You Sow’s shareholder resolution regarding antibiotic overuse on chicken farms by issuing its new Animal Welfare Policy on Antibiotics, restricting meat purchases only from suppliers that no longer use essential antibiotics for treating human infections. This announcement followed McDonald’s decision not to purchase chicken raised using antibiotics used for disease prevention, which breed resistant bacteria strains. While Costco’s move is encouraging, more work needs to be done. For more information regarding its new Animal Welfare Policy on Antibiotics please read here.

Costco’s Organic Chicken

Costco’s Kirkland Signature organic chicken is manufactured at its vertically integrated facility in Fremont, Nebraska and free from antibiotics, hormones and GMOs; furthermore it comes from chickens raised without additives or hormones.

This company’s chicken plant was specifically constructed to reduce production costs, and has proven effective. Even as other retailers increase prices for rotisserie chicken offerings, this company has managed to keep prices at $4.99 for their $4.99 rotisserie chicken product.

Organic chicken from this retailer is air chilled instead of being water cooled, helping preserve natural juices. You can store and freeze it right in its original packaging – ideal for people trying to reduce sodium intake as they only use what they need at one time before refreezing the rest for later reheating!