The big box store hatched a plan to keep their beloved rotisserie chicken affordable.
Hot dogs aren’t the only staple Costco is determined to keep cheap.
Since 2009, Costco has managed to keep its beloved rotisserie chicken under $5—one dollar less than its competitors. But maintaining a $4.99 price point has required the wholesale retailer to sustain losses of as much as $30 to $40 million a year.
In 2015, Costco chief financial officer Richard Galanti explained to The Seattle Times that the big box store is willing to absorb this kind of hit if it means being able provide good deals.
“When others were raising their chicken prices from $4.99 to $5.99, we were willing to eat, if you will, $30 to $40 million a year in gross margin by keeping it at $4.99,” Galanti said. “That’s what we do for a living.”
But today, with demand for the grocery list staple continuing to grow, Costco has decided to go all in. Construction on a $275 million poultry-processing center in Fremont, Nebraska has been in full-swing for the past year. Once complete, the plant will house Costco’s entire rotisserie chicken operations, and allow the company to save big bucks in the process.
The 414-acre plant, set to open in September 2019, will produce about a quarter of the company’s annual U.S. demand: about 100 million chickens a year.
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This isn't the first time Costco has relied on this strategy. They’ve been able to maintain their famous $1.50 hot dog and soda combo since 1985 by building their own hot dog facility in Tracy, California. It’s these consistently low prices that keep customers coming back, and hopefully buying flat-screen TV along the way.