Have you ever wandered through Costco, cart filled with bulk paper towels and gallon-sized shampoo, when that delicious smell hits you? That’s right – I’m talking about those golden-brown rotisserie chickens that somehow still cost just $4.99 despite inflation sending other food prices through the roof.
As someone who’s been a Costco member for years I’ve often wondered how they manage to keep these juicy birds so affordable. Today I’m diving deep into the mystery behind Costco’s famous rotisserie chicken and uncovering the business strategy that keeps it priced lower than practically anywhere else.
The Loss Leader Strategy: It’s Not About the Chicken
Let’s get straight to the point – Costco’s rotisserie chicken is intentionally priced low as what industry insiders call a “loss leader.” In a 2023 earnings call Costco’s Chief Financial Officer Richard Galanti explained it perfectly the chicken is “an investment in low prices to drive membership, to drive sales in a big way.”
What does this mean in regular human speak? Costco is willing to make little to no profit (or even lose money) on these chickens because they know something important – once you’re in the store to grab that $499 bird, chances are you’ll end up buying other stuff too Maybe that TV you’ve been eyeing, or perhaps an engagement ring. (Yes, Costco sells those too!)
There’s a reason these chickens are usually placed toward the back of the store. They want you to walk past all sorts of tempting merchandise before you reach your prized poultry. Pretty clever, right?
Just How Committed is Costco to the $4.99 Price?
The price of Costco’s rotisserie chicken has remained at $4.99 for about 30 years (with just a brief $1 price hike during the 2008 recession). This is remarkable considering inflation has driven up food prices across the board. Chicken prices specifically increased by 18.6% between June 2021 and June 2022, yet Costco’s rotisserie chicken price stayed put.
In fact, in a 2015 Seattle Times interview, Galanti admitted that Costco was comfortable losing $30-40 million in gross margin annually to maintain that magical $4.99 price point. And that was before inflation got really bad!
Vertical Integration: Costco’s Big Chicken Move
In 2019, Costco took an unprecedented step to control costs and ensure they could maintain their affordable chicken price. They became the first US retailer to set up their own chicken production operation – a massive 400,000-square-foot facility in Nebraska.
This move toward “vertical integration” means Costco now controls almost every aspect of their rotisserie chicken production:
- They built their own feed mill
- They operate their own hatchery
- They run their own slaughter plant
- They contract with local farmers to raise around 100 million birds annually
All of this happens under the name Lincoln Premium Poultry (LPP), and it’s estimated to save Costco up to 35 cents per bird. When you’re selling millions of chickens, those savings add up fast!
High Volume, Low Margins: The Costco Way
Another key reason Costco can maintain such low prices is their business model itself. Unlike traditional grocery stores that mark up products significantly, Costco operates on:
- High volume sales – They produce an estimated 100 million rotisserie chickens annually
- Bulk sourcing – Buying in massive quantities lets them negotiate better prices
- Low markup strategy – They’re happy with smaller profits per item as long as they sell tons of them
- Membership fees – Those $60+ annual memberships provide steady revenue that allows for lower product prices
This approach works incredibly well for them – Costco boasts a 90% membership renewal rate worldwide (even higher in the US).
How Does the Quality Compare?
You might be thinking, “OK, but are these super cheap chickens any good?” According to countless fans (there’s even a Facebook fan page with 19,000 followers!), the answer is yes.
Costco’s rotisserie chickens are consistently praised for being:
- Juicy and flavorful
- Well-seasoned
- Larger than competitors’ offerings
- Convenient for busy families
The chickens are also a culinary blank canvas – shoppers often turn them into multiple meals, from salads to casseroles, stretching that $4.99 investment even further.
The Dark Side of Cheap Chicken
While the price point is attractive, there are some concerns about how Costco produces such affordable birds. In 2020, an investigation by Mercy For Animals documented some troubling conditions at a Costco chicken farm, including:
- Birds bred to grow so quickly they had trouble walking
- Chickens with ammonia burns from lying in waste
- Piles of dead birds
To Costco’s credit, they’ve made some improvements compared to conventional chicken producers. They use a more humane slaughter method called controlled atmosphere stunning at their Nebraska plant, and their contracts with farmers are considered more fair than the industry average.
However, critics argue that the environmental and ethical costs of large-scale poultry operations remain significant. Some Nebraska residents living near Costco’s contracted chicken farms have complained about odors, flies, and potential health impacts.
The Competition: How Do Other Stores Compare?
Most grocery stores sell their rotisserie chickens for $6-$10, making Costco’s $4.99 bird a standout bargain. Other retailers and grocers use rotisserie chickens as loss leaders too, but not quite to Costco’s extreme.
Even Costco’s hot dog and soda combo for $1.50 follows the same strategy – keep certain iconic items absurdly cheap to build customer loyalty and drive foot traffic.
The Future of Costco’s Rotisserie Chicken
With inflation continuing to squeeze profit margins, many wonder if Costco can maintain the $4.99 price point forever. So far, they’ve shown remarkable commitment to it, even as production costs have increased.
Their vertical integration strategy gives them more control over expenses, which helps insulate them somewhat from market fluctuations. Other companies have taken notice – chicken chain Wingstop announced in 2022 that it was considering setting up its own supply chain, following Costco’s model.
Is It Really a Good Deal?
Let’s be real – $4.99 for a fully-cooked, seasoned chicken is an incredible value, especially in today’s economy. For many families, it’s a quick and affordable meal solution during busy weeknights.
However, the “true cost” includes:
- The $60+ annual Costco membership fee
- The additional items you’ll likely purchase while in the store
- The environmental and ethical concerns of industrialized chicken farming
How to Make the Most of Costco’s Rotisserie Chicken
If you’re gonna take advantage of this deal (and who could blame you), here are some tips:
- Plan multiple meals – Use the chicken for several different dishes throughout the week
- Save the carcass – Make homemade chicken stock for soups
- Shop with a list – Avoid impulse buys that negate your chicken savings
- Consider sharing a membership – Split the annual fee with family to maximize value
Final Thoughts
The $4.99 Costco rotisserie chicken is a fascinating case study in retail psychology and modern food economics. It’s both a bargain for consumers and a brilliant business strategy for Costco.
While there are legitimate concerns about how such cheap chicken is produced, it’s clear that Costco has found a sweet spot between affordability, quality, and profitability that keeps customers coming back again and again.
So next time you’re at Costco and that delicious rotisserie chicken smell pulls you toward the back of the store, you’ll know exactly why it costs less than a fancy coffee – and you might think twice about what else ends up in your cart on the way to checkout!
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Picking apart what the retail giant’s poultry staple says about the present and future of factory farming.
Americans love their chicken, eating some 7.5 billion of them every year. That’s enough for about 23 birds for every man, woman, and child in the country. So the fact that inflation has hit poultry prices particularly hard — chicken prices increased 18.6 percent between June 2021 and June 2022, outpacing inflation for food as a whole — has been tough for Americans to swallow.
But throughout the year of inflation — and for 11 years before that — one poultry product has remained at the same bargain-basement price: Costco’s $4.99 rotisserie chicken.
The roasted birds have been hailed as an economic lifeline — most rotisserie chickens will run you $6 to $10 — but the chicken isn’t cheap because of corporate benevolence. In 2015, Costco said it was able to maintain its low price because the company considers the rotisserie chicken a “loss leader.” That means its purpose isn’t to bring in profits, but rather to bring in customers to buy more of the wholesale retailer’s bulk toilet paper and five-packs of deodorant. And it works. The item is so popular among Costco members that it has its own Facebook fan page with 19,000 followers.
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But there’s another reason the birds have remained so affordable. In 2019, Costco made an unprecedented move to source its chicken at even lower margins: It set up its own feed mill, hatchery, and slaughter plant in Nebraska, and contracted nearby farmers to raise over 100 million birds each year, all under the name Lincoln Premium Poultry (LPP). It could be saving the company up to 35 cents per bird.
It’s a classic example of “vertical integration.” That means owning each link in the supply chain, which enables companies to reduce operating costs and go bigger. It’s how some of the country’s largest chicken producers, like Tyson Foods, took over much of America’s chicken business. Now, Costco is outdoing them all by being both the meat producer and the retailer.
The move worries industrialized animal farming critics, who say that over the last few decades, meat industry consolidation has worsened conditions for meat-processing workers, intensified largely unchecked air and water pollution, and weakened rural economies.
Lincoln Premium Poultry declined an interview request and Costco did not respond to repeated requests for comment.
To Costco’s credit, the company has made some improvements when compared to most conventional chicken companies. That’s not saying much, but it’s something. The company uses a more humane slaughter method than the industry standard in its Nebraska plant, its contracts with independent farmers are more fair than average, and at $4.99 per bird, no one could accuse the company of price fixing. Costco’s iconic, and somewhat controversial, $4.99 rotisserie chicken. Tim Boyle/Getty s
But Costco still relies on nearly all of the same practices as the rest of Big Chicken, making it an important case study in the hard limits of trying to produce more equitable meat in America’s consolidated, extractive food system, one where consumer price apparently still matters far more than farmer, worker, or animal welfare.
Picking apart Costco’s chicken supply chain means picking apart America’s paradoxical relationship with meat. We’re eating as much of it as ever, praising a company for keeping a whole chicken as affordable as a pint of cheap beer, while also growing outraged at how people and animals are treated to put cheap chicken on our plates.
The “death smell” of Big Chicken
Around two years ago, the North Carolina-based private equity firm Gallus Capital set up three 16-barn sites to raise chickens for Costco, all within 1.25 miles of Greg Lanc, a soybean and corn farmer in Butler County, Nebraska. Each barn is permitted to house 47,500 chickens, which translates into a total of around 2 million chickens alive at any given time in the facilities. And the whole thing has been nightmarish for Lanc.
Lanc says the stench from the barns — a mix of ammonia-laden manure and what he calls “the death smell” from the pits of decomposing birds — has pervaded his home. “[The smell] tries to get inside anything it can.” Dead birds are exposed to the elements at one of the large chicken operations near Lanc’s Nebraska home in April 2022. Courtesy of Greg Lanc
The rotting birds attract swarms of flies, and the noise from trucks transporting feed and chickens is constant, beating up the roads and kicking up dust. Sometimes the traffic is heavy enough to knock pictures off the wall.
“When it’s really bad, I’ve had times where I don’t want to stay here,” he says. “You wake up in the morning with a runny nose and your eyes just burning and there’s no reason for it … My A/C runs all the time. If you open a window for any reason — dust, flies, the smell, you’re at the mercy of all of that. … I have friends stop by and they want to gag.”
Lanc says he and another Butler County resident met with Nebraska’s governor, Pete Ricketts, in June of 2021, which prompted Ricketts’s office to file a complaint about the Gallus-owned farms with the Nebraska Department of Environment and Energy (NDEE). But Lanc says it didn’t reduce the odors from the farms. “[NDEE] did an inspection … and [said] everything’s in compliance.”
“I don’t in any way want to interfere with someone’s life,” Jody Murphey, managing partner of Gallus Capital, which owns the farms, told me. “That’s not our intention, by any means. … There’s no perfect answer here. When we build a farm, we have to build it somewhere. And it’s virtually impossible to put it in a location that is free of an impact for everybody. I’m sensitive to that.”
Murphey added that the farm contractors who live on-site haven’t complained to him about the smell. “We do whatever we can to lessen that [odor] impact, and we’ll continue to do so. And if we can consult with outside third parties, and if there are products on the market that will, I guess, reduce that impact, we’re all for it,” Murphey said. One of the 16-barn chicken farm sites near Lanc’s home in Butler County, Nebraska. Courtesy of Greg Lanc
Lanc says that despite the personal effect of the chicken farms on his life, he hopes local, independent farmers who contract with Costco succeed. But he’s also worried about what the mega-operations that surround his home will do to his health over the long term. A 2021 study found that air pollution from chicken farms is linked to 1,300 premature deaths in the US each year.
“Everybody has said that these operations are going to be around for a long time,” Lanc said. “Well, I’m in my late 40s. … Do I want to live here 20 years from now and deal with this same situation? I mean, will I be here? Will the health problems eventually catch up with me?”
Why is Costco’s Rotisserie Chicken so CHEAP?
FAQ
Are Costco rotisserie chickens worth it?
Yes, Costco’s rotisserie chicken is widely considered a very good deal due to its low, consistent price of $4.99 for a ~3-pound chicken, which is a loss leader designed to bring customers into the store for other purchases. While some critics point out high sodium content, most agree the chicken offers excellent value, convenience, and juicy, flavorful meat at a price that’s hard to beat compared to other grocery stores and even buying a whole raw chicken.
Where do Costco rotisserie chickens really come from?
That’s because while the vast majority of Costco’s rotisserie chickens are indeed supplied by the likes of Tyson, Pilgrim’s Pride, and Foster Farms (among other potential companies), Costco actually farms chickens on its own farms under the name Lincoln Premium Poultry.
What is going on with Costco chicken?
What is the hidden ingredient in Costco rotisserie chicken?
Without it, Costco’s legendary rotisserie chickens wouldn’t be the same. The list of ingredients in the solution is fairly short – water, sodium phosphate, modified food starch, potato dextrin, carrageenan, sugar, dextrose, spice extractives, and salt.