How the Cluck Are These Costco Chickens Profitable?
Why the average North American eats 20 whole chickens per year!
Somehow, Costco has managed to sell their popular 3-lb rotisserie chickens at just $4.99 for over a decade. (And popular might even be an understatement — how many other stores can boast their chickens have a 19,000-strong fan page on Facebook?).
Even today, with record high inflation, supply chain woes and the rising production costs of poultry, Costco has refused to raise its price. If you factor in inflation, Costco should be selling them for $8.32. Seemingly, that would be a $3.33 loss per chicken. . .
So, how exactly is Costco making money on these chickens?
The short answer is they are not. Intentionally.
In a 2015 earnings call, Costco’s CFO, Richard Galanti, said that the retailer was taking a $30-$40 million loss by not raising its price. Why in the world would Costco happily keep losing money on their chickens?
Because the chickens are a loss leader. A loss leader is a product that is sold below its market cost to get more shoppers in the door.
As Costco’s buyers normally buy in bulk and therefore don’t stop in frequently, enticing shoppers inside is vital. Very few people simply come buy the chickens and leave. They generally shop…
