Costco has an amazingly resilient business. Employees love the company, they have run a masterclass in private label and consumers are so tied to the brand that when Amex foolishly made the decision to end their relationship with Costco the credit card company's stock price dropped by 6%! One reason the company's been so successful is the focus on price. In a world where a turmeric latte costs $5 (for all my Indian readers - seriously, haldi dood for $5!), you can still get a hot dog longer than most actual dogs for just $1.50. They value their promise to customers so much so that Costco's now getting into the chicken business.
The chickens have become almost a cult item. 91 million were sold last year, double the number from a decade earlier. They have their own Facebook page with nearly 13,000 followers.
So Costco is willing to go to extreme lengths to keep its chickens at $4.99. For the past few years, it’s been recruiting farmers for this moment: The official opening of a sprawling, $450 million poultry complex of its very own in Nebraska.
Costco loses $30m - $40m (that's million!) a year on their chickens. And yet, chickens as a loss leader makes complete sense. Come for the chicken, walk out with the hundreds of dollars worth of Bounty and frozen food that you don't know where to keep in your apartment. After all, what's a hundred million chickens between friends?Read more...