Costco Builds Nebraska Supply Chain For Its $5 Rotisserie Chickens Costco is building a facility in Nebraska to process chickens from hundreds of nearby farms for sale as rotisserie chickens. The warehouse retailer sells 60 million rotisserie chickens each year.
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Costco Builds Nebraska Supply Chain For Its $5 Rotisserie Chickens

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Costco Builds Nebraska Supply Chain For Its $5 Rotisserie Chickens

Costco Builds Nebraska Supply Chain For Its $5 Rotisserie Chickens

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AUDIE CORNISH, HOST:

The warehouse retailer Costco is going to raise live chickens. It's part of a farm-to-table operation. In this case, it's coop to rotisserie. Costco will compete with the small number of companies who now control most poultry production in the U.S. Grant Gerlock of NET News has this report.

GRANT GERLOCK: If you're a fan of Costco rotisseries, this is where your food comes from, or soon it will. I'm on the south side of Fremont, Neb. and this is where a new chicken processing plant is going up. Right now, it's a lot of steel beams and concrete walls and construction trucks. It's expected to be up and running this time next year. And when it's at capacity, they'll be processing two million chickens per week, all for Costco.

JESSICA KOLTERMAN: All of our barns in Nebraska and Iowa collectively will supply about 40 percent of Costco's needs.

GERLOCK: That's Jessica Kolterman, a spokeswoman for Lincoln Premium Poultry, the company started by Costco to build and manage the Fremont poultry complex. That includes the processing plant, a hatchery, feed mill and contracts with more than 100 new chicken farms in the area to raise the birds.

KOLTERMAN: And that will roughly cover the western half of the United States, Alaska and Hawaii.

GERLOCK: Costco is building this system to control its supply and costs. They sell a whopping 60 million rotisserie chickens each year. But there's a problem. Poultry producers aren't raising enough chickens suitable for the rotisserie. Will Sawyer, who tracks the economics of the meat industry for CoBank, says they're raising bigger chickens.

WILL SAWYER: So the vast majority are processed into chicken breasts or leg quarters or thighs, or they are further processed into strips or nuggets. That's where the industry has gone over 50 years now.

GERLOCK: So Costco is creating its own supply of smaller chickens. Doing it in Nebraska will help keep the price fixed at 4.99 because there's plenty of cheap corn around for feed. Sawyer says, while other chains like Walmart are supplying some of their own milk, they've never gone fully vertical into meat production like this. From the top down, Costco will control both supply and demand, and that concerns some farmers. John Hansen heads the Nebraska Farmers Union.

JOHN HANSEN: Costco comes in. And while they have a good corporate citizen reputation, it still is, at the end of the day, a poultry contract.

GERLOCK: Costco is offering 15-year contracts to raise chickens, but it's up to the farmers to finance their new chicken barns. That could cost millions. And what if Costco sales slump?

HANSEN: What do you do with a poultry barn that is, for the most part, a single-use building if you don't have birds?

GERLOCK: But the farm economy is struggling here, and some grain farmers think turning to chickens is worth the risk. Marshall Lutjens is a young Nebraska farmer who was at a recent open house celebrating the first chicken barns. He says raising chickens just might work for him.

MARSHALL LUTJENS: The only other thing I thought about was hogs because there's more companies.

GERLOCK: There's really no other poultry company around to sell to if Costco sales plummet. Still, farmers here are signing up to raise chickens for Costco, hoping that its members will always be hungry for more. For NPR News, I'm Grant Gerlock.

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CORNISH: That story comes to us from Harvest Public Media, a reporting collaboration focusing on agriculture and rural issues.

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