Dive Brief:
- Costco has started construction on a new poultry processing plant, the Lincoln Premium Poultry facility, in Freemont, Nebraska, according to Food Business News. The $300 million plant will be the wholesaler's first poultry processing facility and hatchery. It is slated to open in April 2019.
- The facility is expected to process 2 million chickens per wek for sale in Costco stores, create 800 new jobs and have a $1.2 billion economic impact on the eastern Nebraska area, the publication said, citing the Omaha Chamber of Commerce.
- “We are eager to continue our work with the community, officials at all levels, our trusted construction partners and with everyone else involved in order to make this business something that Fremont, Neb., and Costco can truly be proud to be part of,” Jonathan Luz, director of strategic planning for Costco, told Food Business News.
Dive Insight:
When Costco first proposed the construction of what's now the Lincoln Premium Poultry facility, the community had mixed responses. Supporters looked forward to the revenue that plant would generate, suggesting area farmers would raise chickens to be slaughtered at the plant and bolster the local economy. Others protested that major chicken processors treat farmers as a disposable resource.
To meet its goal of slaughtering 2 million chickens per week, Coscto has recruited about 120 farmers to sign on as contract poultry producers. And while this appears to be a beneficial relationship for Costco, small poultry farms and the greater community, it comes at a cost for producers. In an interview with NPR, Nebraska farmer Tim Mueller said he plans to take out a $2 million loan to finance the construction of four chicken barns in order to partner with Costco.
The company will ask farmers to sign a 15-year contract and will pay for the best chickens, according to NPR.
If Costco is able to deliver on its goal of 2 million chickens processed per week, this could be a boost to the club store's private label offerings, and its supply of $5 rotisserie chicken. Costco is already beloved by consumers for the quality of its store-branded products, especially its Kirkland wine and spirits, and this plant will give the wholesaler more control over the living conditions of its chickens and quality of the birds. It also may be able to increase the amount of poultry it sells — at present, Costco sells about 80 million rotisserie chickens per year.
It will be interesting to see how Costco enacts animal welfare standards at this plant. Last year, animal rights activists released disturbing video footage of hens attacking and eating one another at a cage-free egg facility linked to Coscto. The independent supplier produced eggs sold under the Kirkland brand, and the video rattled both consumers and industry players.
However, the oversight that Costco will have over this facility, and the relationships it will build with Nebraska farmers, should prove to be beneficial from both a marketing and general PR perspective. Costco has shown great dedication to consumer preferences, such as demand for cage-free eggs and antibiotic-free poultry. It would be wise to use this plant as a means to expand those commitments alongside increased production.
