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Costco opening a $440M chicken farm to escape America's chicken monopoly

380 points| jseliger | 7 years ago |cnbc.com

277 comments

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[+] abc03|7 years ago|reply
Watching several documentation and seeing chicken farms, I Never buy USD 5 chickens anymore. I buy only organic (more time to grow) and if available from my preferred supplier from the farmer’s market (she only slaughters 5 times a year and grows different breeds). My nephew from the US came over and was shocked at the taste (I didn’t tell him about the price as he would probably not eat it). Food prices are not a concern for me and I prefer to increase quality instead of quantity. I should anyway eat less.
[+] makewavesnotwar|7 years ago|reply
Yeah I personally stopped buy chicken years ago for mostly ethical reasons but I think Costco getting into the chicken game will probably be a net positive.

Reason being that for one, Costco was one of the first grocers to start replacing items with Organic alternatives, and in general, they usually demands higher quality goods than other grocers. For example, compare the ingredient list for Delimex taquitos from Costco to your supermarket and it's basically half the size... or Campbell's "Simply" Chicken Noodle soup to what's sold at the grocer - again about half the ingredients. Even those $5 chickens Costco sells are antibiotic/hormone/steroid-free humane-certified Foster-Farms chickens.

Then there's employee treatment. Costco has a long history of being one of the better employers in the country. They pay their employees well, pay for people to attend college, don't require a lot of interaction with irate customers thanks to their no deadline any reason return policy and generally promote internally rather than hiring outsiders to leadership roles.

Compare that to the average chicken farmer who has to buy all of their own equipment that the big companies are constantly requiring them to update at their own expense, raise chickens they don't own like a horrific daycare center at very low return, all while being exposed to chemicals/drugs they're being forced to use and it's kind of a nightmare.

Costco cares about their brand image, their customers and their employees... I expect this will end up being a good thing.

[+] rixrax|7 years ago|reply
All the ethical and taste concerns aside, is that $5 chicken worse, better or about the same for feeding a hungry person? I am thinking of calories intake, potential medium/long term health advantages/disadvantages?

edit: was pointed to this Reuters[0] article which seems like a reasonable starting point.

[0] https://www.reuters.com/article/us-money-chicken-organic/is-...

[+] hinkley|7 years ago|reply
I have several friends who claim to be socially and environmentally conscious but still get sucked in by the cheap baked chickens at the grocery store.

It's $5-6 bucks, seasoned, cooked, in a plastic container. You know there's no way that's a fair price, right?

[+] burtonator|7 years ago|reply
I've always thought that we need some sort of consumer 'geiger counter' where the user can scan a product and have some sort of objective criteria they can use to determine if they should buy/eat something.
[+] mrnobody_67|7 years ago|reply
Yeah... it's indentured servitude... chicken farmers take on millions in debt, and walk out with wages of $20-30K for 18 hour days x 7 days per week..
[+] patrickg_zill|7 years ago|reply
In the Philippines there is a chain of restaurants called Chicken Bacolod. The chicken is a bit smaller than the US but the taste is much better. I think that the chickens are allowed to eat bugs and root around in the dirt.
[+] paulcole|7 years ago|reply
Even the happy chickens get their heads cut off.
[+] yegle|7 years ago|reply
Why would you say organic chicken takes more time to grow? Organic has nothing to do with how long it takes to grow the chicken right?
[+] henryl|7 years ago|reply
To be honest, although I prefer organic chicken for health and ethical reasons, mass produced chicken tastes juicier and better.
[+] qrbLPHiKpiux|7 years ago|reply
Said this to myself recently - I think I buy too much food. Or is it just the packaging... As of lately, I've been patronizing this local farmer's market, they're only open two days a week and I'm buying what I need for the week. I am making a conscious effort to stay out of big-box grocery.
[+] hjek|7 years ago|reply
If you get tofurkey or mock duck instead, you'll never have to worry whether it was battery chicken from a factory farm. Yes, it may taste slightly different, but it's a tiny cost to pay to prevent a long time of extreme suffering.

For me, it has helped my mental well being, to not (even subconsciously) have to think about the life of the being whose flesh I've been eating.

[+] wyldfire|7 years ago|reply
> My nephew from the US came over and was shocked at the taste

Shocked -- because it was surprisingly superior?

[+] magic_beans|7 years ago|reply
When I do eat meat, I'll buy pastured meat only from the farmer's market or ethical butchers. Pastured chicken is $16 a pound. This is definitely not feasible for the average shopper. But then again -- people don't need to be eating chicken every single day.
[+] oblib|7 years ago|reply
I am surrounded by chicken farms, and the farmers who own and operate them. Almost all of them are family owned farms who sell to Tyson.

I can say with confidence that they work hard and are very diligent in maintaining a high standard of quality.

It's a false sense of higher morality to claim "ethical reasons" for not buying those chicken. You aren't saving or improving the lives of any chickens when you do that.

And those chickens don't have it all that bad. I also raise my own chickens and they have a great life for a chicken but it's not idyllic. Chickens have always been low on the food chain and here where I live there are a lot of chicken eaters that are not human.

As for safe and organic feed, we all want that, even my neighbors who are chicken farmers. Right now that's still easier said than done. Costco's move may help lead/push us that direction and I commend them for leading on this issue.

[+] jMyles|7 years ago|reply
> It's a false sense of higher morality to claim "ethical reasons" for not buying those chicken. You aren't saving or improving the lives of any chickens when you do that.

I don't see how this statement can be held with confidence to be true.

If I buy chicken whose precise provenance is known, and which are raised in humane conditions with high-quality feed, with a process that is minimally negatively (or, ideally, positively) environmentally impactful, then indeed there is an ethical gain in doing so.

If I buy from Tyson, I have no way of knowing any of this. Nor does Tyson even claim that I can know these things.

[+] ceejayoz|7 years ago|reply
> It's a false sense of higher morality to claim "ethical reasons" for not buying those chicken. You aren't saving or improving the lives of any chickens when you do that.

Consumer pressure has made a variety of improvements in animal welfare, and is likely to continue to do so.

[+] codeulike|7 years ago|reply
> It's a false sense of higher morality to claim "ethical reasons" for not buying those chicken. You aren't saving or improving the lives of any chickens when you do that.

Yes you are. Every dollar is like a little vote. The things that everyone puts dollars into will grow, and the things that they dont, wont.

[+] specialist|7 years ago|reply
"It's a false sense of higher morality to claim "ethical reasons" for not buying those chicken."

Who are you (bunny ear) quoting?

Costco's investment is to get better pricing.

[+] mbesto|7 years ago|reply
> As for safe and organic feed,

I'm all for "safe" feed, but assigning "organic = safe" is disingenuous. Like it or not (because the studies are not conclusive), but GMO is the only current way we know how to scale food production.

[+] AceJohnny2|7 years ago|reply
> American chicken monopoly run by the likes of Tyson, Pilgrim's Pride and Perdue.

That's not what "monopoly" means.

[+] philip1209|7 years ago|reply
Is "cartel" the word they are looking for?
[+] coryfklein|7 years ago|reply
Oh god, why is everyone here so pedantic.

"Monopoly" in this sense is meant to indicate that one is put in a bad negotiating position because the power/options are consolidated into few hands that can demand bargains that are beneficial to their side thus, in this case, disadvantaging Costco.

Every time you use the word "monopoly" it doesn't have to have an exact 1:1 relationship with a law 101 textbook definition.

[+] nickpsecurity|7 years ago|reply
Yup. That's an oligopoly. If a monopoly, the pricing and service would've been so bad that they'd have tried this sooner.
[+] chrisseaton|7 years ago|reply
'Monopoly' seems to have become a completely meaningless word. I think it now sort of vaguely means a marketplace or any number of successful companies doing their own thing, and people complaining about a monopoly just seem to be complaining that there are any number of existing successful companies in a space they'd either like to be in as well, or that a company won't do exactly what they want.
[+] fudgy73|7 years ago|reply
I'm not suggesting or implying this is happening in the chicken industry but an oligopoly that is colluding can act as a monopoly.
[+] SN76477|7 years ago|reply
American culture is innumerate, you have to use words they understand.
[+] ChuckMcM|7 years ago|reply
I think the bigger story here is whether or not Costco's chicken will improve with respect to the other players in the market.

Consider that the 'big players' have all extracted the costs they felt they could, with the choices they made, and that is the 'standard' product most people are offered. Now we get CostCo which is making different choices and perhaps getting a different result (size, flavor, what have you). In the event that CostCo chicken becomes the market leader and perhaps people are even incentivized to join CostCo in order to have access to their chicken supply, CostCo would likely open a second and third farm so that all of their chicken needs could be met. And what would that do to the profitability of the others?

To my reading, the article implies that these large farms conspire in their offering, otherwise CostCo could just move their business to the one that was willing to meet there terms. Sort of like McDonald's and their beating potato farmers over the head with demands for the specific variety and size pototato they needed for their fries. (which they could do because their purchases were a significant chunk of the market[1])

So without cooperation from the chicken cartel, or perhaps for other unmentioned reasons, CostCo decides to become an agricultural company too.

I'm really wondering if there is some way to disrupt these large agricultural interests effectively. Imagine the Uber for Chicken Farming where an app connects people with extra chicken into a chicken acquisition and slaughtering pipeline for resale.

[1] http://www.nbcnews.com/id/32983108/ns/business-us_business/t...

[+] droopyEyelids|7 years ago|reply
Forgive my tangent, but do you have any idea why you like to write it as "CostCo"?

I notice it's a common practice on news.y to find (or invent) sub-words in names and capitalize them. Like I remember everyone writing "GroupOn" for the portmanteau of "group coupon"

It's puzzling to me and I want to understand where you're coming from!

[+] devonkim|7 years ago|reply
Costco is on a supply chain shakedown it seems because they’re also making an eyewear factory for similar business reasons as with chicken.

Being in Georgia I see some of these chicken trucks full of live and dead chickens and while they’re pretty dumb and dirty birds there’s no question that the birds in the system are suffering terribly. On top of that is the human suffering of the farmers that raise them in the kind of financial conditions they’re subjected to.

I’m fine paying substantially more for better treated chicken but the issue is that I have few guarantees that this is happening when I choose some labels over another given how convoluted the US agriculture and FDA system is.

[+] dbg31415|7 years ago|reply
Look, it's Costco. Not Walmart.

Costco has higher standards than just about any other retailer I can think of.

* Costco tightens standards for antibiotics use by meat producers | The Seattle Times || https://www.seattletimes.com/business/agriculture/costco-tig...

I suspect this move to own their own production is because they couldn't get the quality they expect, at prices they expect, at scale from the current suppliers.

* Animal Welfare | Costco || https://www.costco.com/sustainability-animal-welfare.html

[+] aristophenes|7 years ago|reply
This is really confusing. When the top 5 companies control 2/3 the market, how is that a monopoly? The biggest company is less than 25%.

Anyway, the fact that I can walk into a store (not just Costco, I do this elsewhere) and buy a fully prepared, seasoned, cooked, ready-to-eat, warm, entire chicken for 5 US dollars blows my mind. We don't understand how good we have it. Most of us here on HN can exchange the money we get for less than 10 minutes of work for the aforementioned culinary delight. We're not talking about a bowl of porridge here, this is protein-packed meat. I've been around the world. Everyone (who eats meat at all) loves chicken. We live in paradise.

I can understand ethical and environmental concerns, but we have to be doing something right here.

[+] elektor|7 years ago|reply
Given Costco's size and influence in the food market, I'd like to see them lend more credence to the plant-based meat market which would be even better for them financial and environmentally.
[+] mark-r|7 years ago|reply
For an article about chickens, there sure wasn't a lot of meat in it.
[+] ivankolev|7 years ago|reply
If it is going to use the same factory farming processes, what's the point?
[+] traek|7 years ago|reply
NPR has more info about motivations:

> Building a system to stock its own stores is a way for the company to better manage supply and costs, especially because poultry companies are trending away from raising chickens to be sold whole.

> According to Will Sawyer, a meat industry economist for the Denver-based farm lender CoBank, chicken producers are growing bigger chickens to sell in parts. "The vast majority are processed into chicken breasts or leg quarters or thighs, or they're further processed into strips or nuggets," Sawyer said. "That's where the industry has gone over 50 years now."

https://www.npr.org/2018/10/22/659561091/costco-builds-nebra...

[+] eweise|7 years ago|reply
I read somewhere they want smaller chickens that the farms produce.
[+] tokyodude|7 years ago|reply
You can eat raw chicken at many if not most izakaya (Japanese tapas) in Japan. Tastes great!!

No idea if that means Japanese chicken production is safer or if it's just their food culture is more risky like France's

[+] dawhizkid|7 years ago|reply
I hope Costco survives Amazon
[+] setgree|7 years ago|reply
This is kind of a nitpick, but I wish articles like this specified somehow that Costco buys _dead_ chickens, and dismembered to boot. I know everybody reading it knows that, but I don't like euphemisms/language games that divorce consumers from the choice to eat an animal that was killed for you.
[+] bg0|7 years ago|reply
Just moved to Montreal from the US. Was astounded that chicken price per pound is 5x the price it is back home.
[+] chrischen|7 years ago|reply
It says monopoly byt then lists 3 other competitors. Are they all colluding?
[+] immichaelwang|7 years ago|reply
Does anyone have recommendations on good documentaries in this space?
[+] MrTonyD|7 years ago|reply
I suspect that this is about quality of product. Chicken has had a lot of problems with poisoning people here in the US (since our standards for the environment where chickens are kept isn't designed to reduce disease - rather, it encourages disease.) People have gotten sick from Costco chickens - and Costco's better smaller suppliers have been taken over by the large producers - and of course people start dying again. As long as the profits stay high chicken producers are able to get laws passed to avoid any real regulation. Corrupt government is the real problem we should all be trying to solve as software developers.