Costco’s Inflation-Proof $4.99 Rotisserie Chicken, Explained
In 2019, Costco became the first US retailer to set up its own chicken business, contracting farmers in Nebraska and Iowa to raise 100 million birds and building a feed mill, hatchery, and slaughter plant. Costco has instituted some practices that are more humane and fair than most conventional chicken companies, but some residents are unhappy with the company’s presence. |
Americans love their chicken, eating some 7.5 billion of them every year. That’s enough for about 23 birds for every man, woman, and child in the country. So the fact that inflation has hit poultry prices particularly hard — chicken prices increased 18.6 percent between June 2021 and June 2022, outpacing inflation for food as a whole — has been tough for Americans to swallow.
But throughout the year of inflation — and for 11 years before that — one poultry product has remained at the same bargain-basement price: Costco’s $4.99 rotisserie chicken.
The roasted birds have been hailed as an economic lifeline — most rotisserie chickens will run you $6 to $10 — but the chicken isn’t cheap because of corporate benevolence. In 2015, Costco said it was able to maintain its low price because the company considers the rotisserie chicken a “loss leader.” That means its purpose isn’t to bring in profits, but rather to bring in customers to buy more of the wholesale retailer’s bulk toilet paper and five-packs of deodorant. And it works. The item is so popular among Costco members that it has its own Facebook fan page with 19,000 followers.
But there’s another reason the birds have remained so affordable. In 2019, Costco made an unprecedented move to source its chicken at even lower margins: It set up its own feed mill, hatchery, and slaughter plant in Nebraska, and contracted nearby farmers to raise over 100 million birds each year, all under the name Lincoln Premium Poultry (LPP). It could be saving the company up to 35 cents per bird.
It’s a classic example of “vertical integration.” That means owning each link in the supply chain, which enables companies to reduce operating costs and go bigger. It’s how some of the country’s largest chicken producers, like Tyson Foods, took over much of America’s chicken business. Now, Costco is outdoing them all by being both the meat producer and the retailer.
The move worries industrialized animal farming critics, who say that over the last few decades, meat industry consolidation has worsened conditions for meat-processing workers, intensified largely unchecked air and water pollution, and weakened rural economies.
Lincoln Premium Poultry declined an interview request and Costco did not respond to repeated requests for comment.
To Costco’s credit, the company has made some improvements when compared to most conventional chicken companies. That’s not saying much, but it’s something. The company uses a more humane slaughter method than the industry standard in its Nebraska plant, its contracts with independent farmers are more fair than average, and at $4.99 per bird, no one could accuse the company of price fixing.
But Costco still relies on nearly all of the same practices as the rest of Big Chicken, making it an important case study in the hard limits of trying to produce more equitable meat in America’s consolidated, extractive food system, one where consumer price apparently still matters far more than farmer, worker, or animal welfare.
Picking apart Costco’s chicken supply chain means picking apart America’s paradoxical relationship with meat. We’re eating as much of it as ever, praising a company for keeping a whole chicken as affordable as a pint of cheap beer, while also growing outraged at how people and animals are treated to put cheap chicken on our plates.
The “death smell” of Big Chicken
Around two years ago, the North Carolina-based private equity firm Gallus Capital set up three 16-barn sites to raise chickens for Costco, all within 1.25 miles of Greg Lanc, a soybean and corn farmer in Butler County, Nebraska. Each barn is permitted to house 47,500 chickens, which translates into a total of around 2 million chickens alive at any given time in the facilities. And the whole thing has been nightmarish for Lanc.
Lanc says the stench from the barns — a mix of ammonia-laden manure and what he calls “the death smell” from the pits of decomposing birds — has pervaded his home. “[The smell] tries to get inside anything it can.”
The rotting birds attract swarms of flies, and the noise from trucks transporting feed and chickens is constant, beating up the roads and kicking up dust. Sometimes the traffic is heavy enough to knock pictures off the wall.
“When it’s really bad, I’ve had times where I don’t want to stay here,” he says. “You wake up in the morning with a runny nose and your eyes just burning and there’s no reason for it ... My A/C runs all the time. If you open a window for any reason — dust, flies, the smell, you’re at the mercy of all of that. ... I have friends stop by and they want to gag.”
Lanc says he and another Butler County resident met with Nebraska’s governor, Pete Ricketts, in June of 2021, which prompted Ricketts’s office to file a complaint about the Gallus-owned farms with the Nebraska Department of Environment and Energy (NDEE). But Lanc says it didn’t reduce the odors from the farms. “[NDEE] did an inspection ... and [said] everything’s in compliance.”
“I don’t in any way want to interfere with someone’s life,” Jody Murphey, managing partner of Gallus Capital, which owns the farms, told me. “That’s not our intention, by any means. ... There’s no perfect answer here. When we build a farm, we have to build it somewhere. And it’s virtually impossible to put it in a location that is free of an impact for everybody. I’m sensitive to that.”
Murphey added that the farm contractors who live on-site haven’t complained to him about the smell. “We do whatever we can to lessen that [odor] impact, and we’ll continue to do so. And if we can consult with outside third parties, and if there are products on the market that will, I guess, reduce that impact, we’re all for it,” Murphey said.
Lanc says that despite the personal effect of the chicken farms on his life, he hopes local, independent farmers who contract with Costco succeed. But he’s also worried about what the mega-operations that surround his home will do to his health over the long term. A 2021 study found that air pollution from chicken farms is linked to 1,300 premature deaths in the US each year.
“Everybody has said that these operations are going to be around for a long time,” Lanc said. “Well, I’m in my late 40s. ... Do I want to live here 20 years from now and deal with this same situation? I mean, will I be here? Will the health problems eventually catch up with me?”
The debt trap of modern-day chicken farming
As bad as living close to an industrialized poultry operation can be, life may not be much better for some of the workers raising the chickens that will end up on Costco’s shelves.
Chicken farming in the US is a little like driving for Uber, but with much, much higher stakes. Farmers are typically contractors and take on much of the liability in raising chickens: They need to secure loans worth hundreds of thousands, or millions, of dollars to build out barns, in much the same way an Uber driver supplies their own car. The farmer also relinquishes control over the quality of the inputs — the birds and the feed — and that quality, in part, affects how much they get paid, in the same way Uber attracts customers of varying quality, cordiality, and generosity.
Poultry contract farmers are often paid via a zero-sum “tournament system” which critics say effectively pits farmer against farmer. Those who convert feed to meat more efficiently are rewarded handsomely at the expense of lower-performing farmers who earn a below-average payout. (The spread of chicken farmer income is enormous, with the 20th percentile of earners making around $19,000 per year in 2011 and the 80th percentile making around $143,000.)
In a plus for the retailer, Costco says it’s done away with the tournament system. Still, John Hansen, president of the Nebraska Farmers Union, which advocates for independent farmers in the state, says that while Costco’s contracts are better than average, “that doesn’t mean that they’re good — that just means they’re better than average.”
The environmental nonprofit Food and Water Watch found that areas of Iowa with industrialized pig farming, which has become increasingly contract-based, have experienced higher rates of economic and population decline than those that haven’t. The Pew Research Center has drawn similar conclusions, which goes against a common meat industry talking point that contract farming boosts local economies and helps to keep struggling farm families on their land.
“The state of Nebraska might get a few taxes off of Costco, but all the profit is in a hermetically sealed tube that shoots it back to [Costco in] Seattle,” says Randy Ruppert of Nebraska Communities United, a nonprofit that advocates against industrialized animal farming. (Costco is headquartered in the Seattle suburb of Issaquah.)
Costco counters that its slaughter plant alone has brought around 1,100 jobs to Nebraska. But US poultry slaughter plant jobs are some of the most dangerous and grueling jobs in the US. Slaughter lines move at a dizzying pace — 140 birds per minute — and chicken processing plant employees, working quickly with knives, suffer cuts and hand and wrist injuries as they try to keep up.
Since Costco sells its birds whole, it requires less processing and thus less knifework, which could result in fewer injuries than the average plant. And at its Nebraska slaughter plant, it uses a slaughter method called controlled atmosphere stunning. That method reduces workers’ contact with chickens and reduces the likelihood of injury. But Darcy Tromanhauser of Nebraska Appleseed, a nonprofit that advocates for worker protections, said, “The combination of speed, slippery floors, some knives, and heavy machinery is still a worrisome combination anywhere.”
Earlier this year, a chemical leak at Costco’s poultry processing plant injured three workers.
“This is just what you find when you walk into an industrial chicken barn”
In 2020, an investigator with the animal rights group Mercy For Animals worked at a Costco chicken farm wearing a hidden camera and documented birds bred to grow so fast they had trouble walking, chickens with ammonia burns caused by lying in their waste, and piles of rotting dead birds. (Disclosure: I worked at Mercy For Animals prior to Vox.)
Costco’s treatment of chickens gained national attention when former New York Times opinion columnist Nicholas Kristof wrote about the investigation; even the creator of the Costco rotisserie chicken Facebook fan page was mortified enough to film a video calling for change.
As unappetizing as the conditions were, Leah Garcés, Mercy For Animals’ president, said they were typical across US poultry farms: “I have been into many, many chicken barns and this is just what you find when you walk into an industrial chicken barn.”
Months later, Costco stated it would explore giving birds more space and requiring its third-party, non-organic chicken suppliers to use the more humane slaughter method that it already uses at its Nebraska plant. Nothing committal, no timelines, but progress nonetheless, Garcés said. Critically, she says, the company acknowledged some of the health issues caused by fast-growing chickens, a top priority for animal welfare advocates, and said it’s speaking with chick suppliers about breeding chickens to have fewer leg issues.
Nor is Costco alone in these changes. Perdue Farms, the fourth largest US poultry producer, has led the pack among the top 10 in experimenting with and implementing welfare changes, such as giving chickens a little more space, installing windows on barns to provide natural light, and researching better breeding practices. The changes are modest, but animal welfare groups have praised the company for being the first mover. Wayne Farms, the seventh largest producer, is also raising some of its chickens with similar requirements.
Both companies can meet some of the demand of the 200 restaurants and food companies that have signed on to the Better Chicken Commitment, a pledge to source higher-welfare chicken by 2024.
Costco hasn’t signed on — doing so would likely make it difficult to maintain its $4.99 price tag, something it has made clear it intends to do, inflation be damned.
Alene Anello, president and founder of the nonprofit Legal Impact for Chickens, hopes she can speed up change through the courts. Last month, Anello filed a lawsuit alleging that Costco is violating Nebraska and Iowa animal welfare laws that prohibit animal neglect. The lawsuit alleges that because Costco raises chickens to grow so quickly to the point they have trouble walking, some birds can’t access water and feed, causing them to die from dehydration, starvation, and untreated injuries and illnesses. (Disclosure: Anello and I both interned in separate departments at the Humane Society of the United States in 2009. I also worked with a plaintiff in the lawsuit, Krystil Smith, at the Humane Society of the United States in 2013.)
“The main relief we want is just an injunction ... saying Costco needs to treat birds better and make sure each of the birds has food and water,” Anello says. It’s an attempt to force a chicken company to address alleged long-standing health issues wrought by chicken breeding — that is, if they can win.
Though Costco’s business model has been controversial to some, it could be the future. Wingstop, a chicken chain with over 1,500 US locations, said in May that it’s considering setting up its own supply.
As for Nebraskans unhappy with Costco’s move into the Cornhusker state, it’s unlikely they’ll see much redress in the coming years. Jim Pillen, the Republican candidate for Nebraska governor, is expected to win this November. He was also the country’s 16th largest pork producer as of 2016, and has made it clear he’s unlikely to step in to regulate Nebraska’s chicken industry.
Some change could come from the White House, though. In late May, President Joe Biden announced the first in a suite of regulatory updates to give contract farmers a little more power in their relationship with meat companies. But given persistent inflation and the fear of a recession, the drive for consumers to tighten budgets wherever possible will remain strong, especially for necessities like groceries. That means for now, the $4.99 rotisserie chicken likely isn’t going anywhere but into more shopping carts.
Correction, 2 pm: A previous version of this article misstated the number of Wingstop locations in the US. There are more than 1,500.