- June 5, 2021
- Posted by: Mary Meisenzahl
- Category: Featured
- Costco CFO says that the company is under “inflationary pressures” with shortages.
- The company says it won’t increase the $4.99 rotisserie chicken price.
- The rotisserie chicken is sold at a loss to draw in customers.
- See more stories on Insider’s business page.
Costco’s famous $4.99 rotisserie chickens are getting more expensive for the store to stock, according to Chief Financial Officer Rich Galanti.
Inflation and rising costs are making nearly everything more expensive for consumers, from meat and cheese to electronics. Big box stores like Costco aren’t immune to these higher costs, some of which may be passed on to customers, Insider’s Áine Caine reported.
Costco is under “inflationary pressures,” Galanti said in an earnings call, including “higher labor costs, higher freight costs, higher transportation demand, along with the container shortage and port delays,” along with widespread shortages.
The price of a rotisserie chicken should stay the same for customers, though Galanti says “there’s been some pressure on some cost components of these items. So those are already impacting our margins a little.” The chickens were already sold at a loss for Costco – the $4.99 price has remained the same since 2009, even as costs of labor and production have increased.
“When others were raising their chicken prices from $4.99 to $5.99, we were willing to eat, if you will, $30 [million] to $40 million a year in gross margin by keeping it at $4.99,” Galanti said in 2015. The chickens are sold at a loss, but they, along with gas and food court items, draw customers into stores where they might make other more profitable purchases.
The rotisserie chickens are also a Costco staple. The big box store sold 87 million in 2017, and 91 million in 2018. To keep costs as low as possible, Costco opened the $450 million facility in Nebraska in 2019, which processes about 2 million chickens a week, with plans to eventually supply nearly half of the chain’s total chickens.
As prices increase, hot dogs are the other staple Costco customers can count on to stay at the same price, even as beef costs surge as much as 20%. The hot dog and soda combination has been priced at $1.50 since 1985.
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