Costco Misses Out On $40M/Year Because Of $5 Rotisserie Chickens, And It’s Okay With That

When you buy a jug of mayonnaise or a mammoth pack of toilet paper rolls at Costco, you understand that you’re saving by buying in bulk. But then there are the $4.99 rotisserie chickens that you don’t have to buy by the dozen to get that low price. In fact, Costco is the one getting the short end of that deal, missing out on millions a year by keeping the price low.

Speaking this week to analysts about the wholesale club’s quarterly earnings, Costco chief financial officer Richard Galanti answered a question about the company’s philosophy on the cheap chickens.

“I can only tell you what history has shown us: 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,” he explained, according to the Seattle Times. “That’s what we do for a living.”

In 2014, Costco sold 76 million of these chickens, just about one per club cardholder. Just like the $1.50 hot dog and soda combo (and other low-priced menu items) at the Costco in-store snack bars, they appear to be helping to get customers in the doors where they can make purchases on higher-margin items.

The price of chicken has remained flat in the last year, but that might change due to a recent outbreak in avian flu, though many of the chickens that have died or been euthanized were raised for egg production.

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  1. DaddyBee says:

    CostCo chickens are cheap and awesome. They are a fantastic deal hands down and we always talk about going to Costco just to get the chicken – but of course we never do, and when we do go, we spend hundreds of dollars. They have a business plan that strikes at the heart of human psychology. Offer them a deal they can’t refuse, then offer them lots of the stuff they love for what seems like low prices, even though they’re paying 2-3 times what they pay in the grocery store. (Yes I know you are getting more than your money’s worth – but why do we find ourselves unable to walk out of that store without binging on more than we need?)