Costco has been very slow in making changes over the history of the warehouse club. That's because the company uses a membership model where its key business metric is keeping those members happy largely by delivering low prices.
The chain moves at a glacial pace when it comes to innovation. That's because money invested in its website or other technology means it has less cash to invest in lowering prices.
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It's not that Costco (COST) stays exactly the same. It has spent money to move into e-commerce, and it has found clever ways (like its partnership with Instacart) to offer same-day delivery.
The company, however, clearly looks at every dollar it invests and weighs the value of any spending. In some cases, its expenditures have actually been a method to control costs.
During the covid pandemic, Costco actually leased ships in order to keep its supply chain running at predictable costs. That's something the company has been unwinding now that many of the issues affecting its supply chain have subsided.
In addition, Costco actually has a few sacred cows that it has taken extreme steps to keep in place. The first, its famed $1.50 hot-dog-and-soda combo, likely actually makes the chain money given the relatively low product costs.
The second, its $4.99 rotisserie chicken, is a tougher price point to maintain and the company is making a significant change.
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Costco changes its $4.99 chicken
Costco has taken extreme steps to keep its whole rotisserie chicken at $4.99. That included buying a chicken farm in order to cut out the middleman.
The only retailer to own its own chicken farm and the attendant processing plant, Costco invested $1 billion in keeping its stores stocked with chickens. Located in Nebraska, the facility gives Costco control over its supply and makes it immune from rising or falling poultry prices.
Costco sees its $4.99 rotisserie chicken as a traffic driver to its stores, and while the warehouse club has kept the price point, it has made a big change to the product.
"In mid-March, an apparent internal memo shared on Reddit in a now-deleted post claimed that Costco planned to start serving its rotisserie chickens (140 calories per serving) in plastic bags instead of the clear plastic containers it has long used in the United States," Eat This, Not That reported.
"The memo indicated that the new bags would be more environmentally friendly thanks to a 75% reduction in plastic, but said the iconic roasted birds would still have the 'same product quality.'"
The new packaging has now been seen in stores, according to multiple posts on social media.
A number of retailers use bags as packaging for their rotisserie chickens, but some fans like the plastic containers as they make it easier to graze on the chicken rather than eat it all at once.
Costco makes another investment
In addition to buying a chicken farm, Costco has also been investing in its digital offerings. Now-retired CFO Richard Galanti talked about one of those efforts during the warehouse club's second-quarter earnings call.
"A couple of comments on the seller platform. Costconext.com allows our members [exclusive] access to direct-to-consumer sites for top-quality brands at Costco value pricing. Currently, there are about 70 Costco Next brand sites with 15 additional sites in development," he shared.
Galanti, who retired on March 15, has big hopes for Costco Next.
"We will likely end this calendar year with about 90 sites and continue to grow from there. Costco Next offers everything from home improvement to apparel, to pet, to home, to kitchen to electronics, to accessories as well as sports, bicycles, and toys. You should check it out. It's a pretty good site," he added.
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