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  • If you're the observant sort of shopper who wants to get the most out of every dime, it's possible you've noticed that Costco's fully cooked, 3-pound rotisserie chickens are actually cheaper than their uncooked ones.

  • They're also among the cheapest rotisserie chickens around, making this a deal that seems too good to be true.

  • "so, you got money?"

  • "Not a penny. But I'll still take that chicken!"

  • In fact, the chicken is so cheap, it doesn't seem like Costco could even make money selling them.

  • And yet, Costco continues to sell them for $4.99 while their competitors have raised prices.

  • So what's going on here?

  • To get the answer, first we have to jump in the wayback machine for a look at the avian flu crisis of 2015, which threatened the entire US poultry industry.

  • With countless birds lost, Barclays analyst Meredith Adler asked Costco's chief financial officer Richard Galanti if this would finally result in the company raising prices.

  • He said, "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. That's what we do for a living."

  • Why would Costco leave tens of millions of dollars in potential profits on the table if they could sell the chicken for more?

  • Because they think they can make even more money by selling chicken cheaper.

  • Costco first began selling their $4.99 chicken in 2009 and it was an instant hit.

  • Just a year later, Costco sold 51 million rotisserie chickens, and by 2017 that number was up to 87 million.

  • That's a lot of customers coming through the door looking for chicken, which is why Costco keeps their chickens all the way in the back of the store.

  • Many other chains use the same strategy of luring customers into their stores with cheap, delicious chicken.

  • Don Fitzgerald, vice president of merchandising at the Kroger-owned Mariano's, told the Wall Street Journal that it's all about getting people in the door, and then pouncing with high profit margin add ons.

  • "If they get a chicken, a salad, and maybe they pick up a bottle of wine , now we're really talking."

  • While Costco isn't the only player in the rotisserie chicken game, they're taking steps to go above and beyond their competition.

  • Since they started selling, they've invested in larger, high-efficiency ovens, and containers made with less plastic, both of which help keep their costs down.

  • And, in 2018, the Seattle Times reported Costco was investing hundreds of millions of dollars in a massive chicken farm located in eastern Nebraska.

  • The centrally-located state was chosen, in part, because of the large corn and soybean production there, which will save Costco on feed costs.

  • That's important, because they're going to have a lot of chickens to feed: an estimated 100 million a year.

  • The only downside, of course, is a less personalized chicken experience than you might get from a boutique dealer.

  • "The chicken you'll be enjoying tonight…" "You have this information, this is fantastic!"

  • "Absolutely! His name was Colin."

  • And there are other plans in the works, too.

  • They're in talks to raise hundreds more chicken barns, and while it's a hefty initial investment, it's going to help keep their costs low in the future.

  • Of course, none of that explains why Costco's uncooked chickens are actually more expensive than their cooked chickens, which seems backwards.

  • After all, they're doing all the work so you don't have to!

  • "What are we supposed to do with that?"

  • "Eat it."

  • "Eat it?! The f-----'s alive!"

  • But Time Money suggests there may be a sneaky reason for this too, cooked chickens are going to go bad faster, and they want to keep them at a price point that'll make sure they're continuously going out the door.

  • They definitely do at that price!

  • It's also worth noting that rotisserie chickens aren't the only products Costco has said they'll keep at these insanely, super-low prices.

  • According to Time, Costco's jumbo hot dog and drink deal has been priced at $1.50 since the mid-1980s.

  • It's all about increasing foot traffic, and that's been particularly challenging for stores like Costco, which generally aren't located in super-convenient areas where people might pop in regularly to see what's on the shelves.

  • People need a reason to make the trek to Costco, and what's a better reason than a quick and tasty low-cost dinner that's ready to serve?

  • And besides, passing up the chicken might make them angry.

  • And you don't really want to get the rotisserie chicken angry, do you?

  • "I don't know, I think they're kind of cute, this one just walked right up to me and…"

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If you're the observant sort of shopper who wants to get the most out of every dime, it's possible you've noticed that Costco's fully cooked, 3-pound rotisserie chickens are actually cheaper than their uncooked ones.

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This Is Why Costco Only Charges $5 For A Rotisserie Chicken

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    Julia Kuo posted on 2019/08/14
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