Why Costco’s rotisserie chicken has cost the same for 11 years
‘We were willing to eat, if you will, $30 to $40 million a year in gross margin by keeping it at $4.99’
Rotisserie chickens at Costco have had the same price tag since 2009, despite losses over the years.
In fact, the wholesale retailer kept selling its 3-pound chicken for $4.99 during the avian flu outbreak in 2015 which caused chicken prices to increase, according to a 2018 report from The Wall Street Journal.
During an earnings call in 2015, Costco chief financial officer Richard Galanti said the company was willing to lose tens of millions annually to keep the rotisserie chicken price steady, The Seattle Times reported at the time.
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“When others were raising their chicken prices from $4.99 to $5.99, we were willing to eat, if you will, $30 to $40 million a year in gross margin by keeping it at $4.99,” Galanti said. “That’s what we do for a living.”
The inexpensive rotisserie chicken is meant to bring in foot traffic in the hopes that customers will pick up other, more expensive items along the way, The Journal reported.
In fact, Costo keeps its rotisserie chickens in the back of the store for just that purpose.
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According to The Journal, Costco sold 87 million rotisserie chickens in 2017 and in 2018, the company sold 91 million, CNN reported last year.
Overall, 625 million rotisserie chickens were sold in the U.S. in 2017, The Journal reported.
Even though the company has kept its rotisserie chicken price the same, Costco has saved money by buying bigger ovens and using containers made with less plastic for packaging.
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The wholesaler even built a $300 million chicken plant in Nebraska, according to The Journal.
According to a 2018 report from NPR, the completed plant was expected to process more than 2 million chickens for rotisserie chickens and for parts.
By owning its own chicken processing plant, Costco is able to control its supply and costs, NPR reported.
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But rotisserie chickens aren’t the only Costco item that has stayed at a fixed price. Its famous hot dog and soda combo in the store’s food court has cost $1.50 since 1985, according to Business Insider.