Costco is planning to vertically integrate by owning production of 40% of its rotisserie chicken supply chain.
Vertical integration is an effort to keep the price at $4.99 to attract customers. The issue is that the main chicken suppliers are producing fewer whole birds, down from 50% of the supply in the 1980s to just around 15% of the supply today.
Bird size has also increased as the demand for chicken has increased. Most whole chickens today are too big to fit on the Costco rotisserie production equipment. Costco needs 6 pound birds and the typical whole chicken is now 7-8 pounds from suppliers.
Costco can control the size of the bird and plans to cut costs per bird by 35 cents by developing their own poultry complex.
Video Spotlight: This Is Why Costco Only Charges $5 For A Rotisserie Chicken
This post is based on the CNN article, Five things to know about Costco’s $4.99 rotisserie chickens, by Nathaniel Meyersohn, October 14, 2019, and the YouTube video, This Is Why Costco Only Charges $5 For A Rotisserie Chicken, by Mashed, February 5, 2019. Image source: Uwe Starke/Image Source
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