While Costco first announced its $400-million, Nebraska-based chicken processing plant two years ago, the wholesaler is still in a league of its own as one of the only retail and foodservice operators to integrate its meat production in-house. With the opening date for the facility still a year away, Will Sawyer, Lead Animal Protein Economist for CoBank Knowledge Exchange, examined the results of this unprecedented move and posits a possible ripple effect in the retail and foodservice sector.
“Never before has the U.S. seen a retailer integrate its meat supply to the farm level and take on direct exposure to the risk of animal husbandry, including feeding, animal welfare, harvesting, trade, disease, and distribution,” writes Sawyer in a CoBank report. “Of the numerous poultry complexes built in the last five years, there are many features that make this complex different. Nonetheless, if Costco’s foray into production and processing is successful, it could be the model for other food retailers and foodservice companies to vertically integrate into other protein sectors like beef and pork.”
Costco’s sales of rotisserie chicken have grown by more than 8 percent annually since 2010, which is more than three times the growth rate of total U.S. poultry consumption, according to Sawyer. As a result, Costco’s new facility aims to help the retailer streamline and take ownership of its supply chain from farm-to-fork.
Specifically, Sawyer outlines three factors that have contributed to Costco bringing its poultry needs in-house, including surety of supply, visibility up the chain, and cost control. These three factors will, in the long run, help the wholesaler maintain its consumer traffic with a low-cost product; ensure its product is sustainable, meets the food safety requirements, and is high-quality in the long-term; and overall help it save costs on feed, water, and labor.
With a tentative opening date of September 2019, Costco’s current goal for the facility is to process 100 million chickens per year and produce a third of its rotisserie program in-house, with the rest of the facility processing chicken parts.
Will Costco’s foray into protein processing encourage more retailers and foodservice operators to try their hand at production? Deli Market News will continue to report.