You Can't Make Everybody Happy All the Time: the Costco Chicken Story

We’ve written before on consumer demand’s impact on agriculture. Non-GMO, organic, cage-free, sustainable, antibiotic-free, lab-grown…there is a long list of products developed in response not to regulatory changes, but rather to meet consumer demand. Of course not all attempts to meet consumer demands can make everybody happy all of the time.

Costco is taking its rotisserie chicken supply chain under its wing. Costco’s plan, currently underway, is to build a large $400 million chicken farm in Nebraska to source the immensely popular $4.99 chickens. The retailer sells over 90 million rotisserie chickens each year at that price point. But as Costco’s rotisserie chicken program has grown, the availability of the chickens that Costco relies on has dwindled. In today’s U.S. poultry sector, just 10 percent of poultry is sold as a whole bird, down from 22 percent thirty years ago. Costco’s plan is to build the hatchery, farm, and processing facility all in one place.

The benefits to the retailer include security of supply—knowing the birds will be available. Consistency will be improved, as bird sizes can be more closely monitored. Traceability is increased, as a person buying a chicken will know where it is from and how it was raised. Finally, Costco should be able to save money by locating this farm in Nebraska, where a large portion of our nation’s grain supply and a readily available source of water is located. Of course Costco runs a risk here, too: it has to manage the entire supply chain and all its potential problems, instead of leaving that to third-party supply chain partners.

This plan has attracted negative attention as well. Critics say the plan leaves the risk of raising live chickens in the hands of its contract farmers. Costco needs to recruit around 125 farmers to build chicken barns within a 100-mile radius of the new facility under 15-year contracts. Proponents say this plan has the potential to bring the next generation back to the farm and will give them a chance to make a living by farming. Opponents criticize the contract chicken grower approach and say these farms will hurt farmers in the long run.

In trying to give the consumer what it wants—cheap, safe, healthy, consistent chicken, Costco is learning the lesson that you can’t make everybody happy all of the time. Consumer demand is pushing farmers to make changes on their operations, but I think we’ll continue to see that making those changes doesn’t always appease everyone. Farms should be open to change but must consider the pros and cons before signing a contract to alter their agricultural operations. There is no one size fits all solution.