Costco to build a chicken coop
Costco is looking to build a poultry processing plant in Nebraska with the aim of gaining greater control over its food supply chain.
Domestically, Costco sells 60 million of its $4.99 rotisserie chickens per year. The new plant is expected to supply a third of its fresh chicken needs when it reaches full production in 2019.
The plant will boost chicken margins by reducing wasteful and costly overproduction.
“Most plants can have up to 300 items they produce to please all their customers. This is a purpose built plant that will produce 18 SKUs for us. This gives us the chance to be very efficient,” Jeffrey Lyons, Costco’s SVP merchandising – Fresh Foods, told Forbes.
The initiative also supports Costco’s move toward antibiotic-free and cage-free chickens, demand for organic offerings, and the expansion of its Kirkland brand. Tighter control of chicken supplies further addresses food safety concerns.
Costco plans to buy 300,000 bushels of corn and 3,000 tons of soybean meal per week from local providers, according to a press release from the Greater Fremont Development Council, a local public/private partnership in Nebraska.
The factory, which needs local approval, promises to create roughly 1,100 jobs and investments of $180 million in the region. Georgia-based Lincoln Premium will operate the poultry farm. Costco will retain its partnership with Pilgrim’s Pride Corp., which currently produces chickens for Costco in Alabama.
A Seattle Times article from early April noted that Costco has already made investments to shore up its organic food supply. Beyond the Alabama chicken plant, Costco partnered with a Mexican vendor to secure wild shrimp from the Sea of Cortez. It has also bought cattle and is contracting with owners of organic fields in Nebraska.
Mr. Lyons told the Seattle Times the initiatives are based on two questions: “What do we see down the road that could be a challenge in terms of supply? And what can we put in place today to grow that particular scarce resource?”
- Costco Wholesale Corporation Selects Greater Fremont Dodge County, NE as Potential Site to Locate Poultry Processing Complex – Greater Fremont Development Council
- NDA Director Ibach Touts Value Added Agriculture As Good For All Nebraskans – Nebraska Department of Agriculture
- Fremont’s Positives Led City to be Finalist for Integrated Poultry Operation – Greater Fremont Development Council
- Behind Costco’s Plan To Plump Up Profits With Its Own Chicken Plant – Forbes
- Costco plans chicken plant in Nebraska: local council – Reuters
- Costco exec delivers message to farmers on chicken plant – Associated Press
- Costco selects Nebraska as site for a new chicken processing plant – Puget Sound Business Journal
- Costco gets creative to meet shoppers’ huge appetite for organics – The Seattle Times (tiered sub.)
Does it make sense for Costco to build a poultry processing plant? What are the pros and cons of such moves by retailers to take greater control of the food supply chain?