Costco integrates meat supply to farm level

US-based retailer Costco has integrated its meat supply to the farm level to address the risks associated with animal husbandry, including feeding, animal welfare, disease prevention and harvesting.

According to a new report released by CoBank’s Knowledge Exchange Division, the initiative is expected to prompt other food retailers and foodservice companies in the country to re-examine their own supply chain integration opportunities.

Next September, Costco is planning to open its new chicken complex in eastern Nebraska and anticipates that the new facility’s in-house production could generate a savings of 10¢ to 35¢ a bird.

CoBank lead animal protein economist Will Sawyer said: “We see the decision by Costco to bring its poultry supply in-house as a result of three primary drivers – surety of supply, visibility up the chain and cost control.

“The ability to control the consistency of bird weights enhances food preparation and safety. Locating the facility in Nebraska also provides access to feed at favourable costs, a reliable water supply, and a comparatively advantageous labour market.”

The CoBank report suggested that the initiative is in response to Costco’s rotisserie chickens that have become a major traffic-driver for in-store customers, while available supplies of whole birds at targeted weights have declined.

Costco’s Nebraska facility will have the capacity to process 100 million birds a year with one-third of the rotisserie programme being produced in-house. Additionally, the facility will also process chicken parts.

If the initiative taken by Costco is successful, it could serve as the model for other food retailers and food service companies to vertically integrate with other protein sectors.

Sawyer added: “Food retailers will need to evaluate a number of risks in order to justify the investment of time and capital required to build their own production capacity.”