Here's Where Costco Sources Its Rotisserie Chickens

Costco's food court is a hallowed place where food products can turn into cult favorites thanks to the astounding quality-to-price ratio on offer. The membership retail chain's hot dog combo is iconic for its $1.50 price, for instance, while its sub-$2 pizza slice is actually pricier than buying a whole pie, and the rotisserie chickens are $4.99 for a whole cooked bird.

In order to offer such deals, Costco has established itself in vast and complex supply chains. However, sometimes even that's not enough. While you may be impressed by the chain's pizza-saucing robot (which ensures every Costco pizza tastes good), the retail giant has had to do a whole lot more to fill the burgeoning demand for its rotisserie chickens. Unlike several other products, its chickens are sourced completely in-house. 

To keep prices of the rotisserie chickens fixed amidst widespread inflation, Costco has spent an estimated $1 billion to establish and run its own vast chicken farm in Nebraska. The company is the first major U.S. retailer to establish and run its own poultry farm. Despite that, Costco's rotisserie chickens are still sold at a loss. That's all part of the retail giant's strategy to keep its members coming back. In 2015, Costco's chief financial officer even stated that the company was willing to sacrifice up to $40 million a year to keep the price fixed at $4.99 (via CNN).

Since 2019, Costco has run Lincoln Premium Poultry in Fremont, Nebraska. It's a vast farm that processes about 2 million birds a week and takes on seemingly everything from hatching and raising the chickens, to what they eat and how they are slaughtered (Costco's practices there are widely considered more humane than the industry standard, but some have nevertheless raised serious concerns). This whole process saves the company an estimated 35 cents per bird, which can grow significant considered the sales volume of rotisserie chickens.

This isn't the first time the company has vertically integrated production of a popular food item. Because of the huge number of hot dogs Costco sells, it now has a plant in California that manufactures them, though these too are sold at a loss.  While this is certainly great for buyers, it is also part of the loss leader strategy that the company employs to draw in customers. Another benefit of raising chickens in-house (more or less) is consistency. Since the Costco rotisserie chicken is whole and not pre-cut, the size and weight of the birds need to remain relatively consistent for more efficient processing.