Inside Costco’s new, $450 million chicken operation

By Austin Alonzo – courtesy of WATT Global Media, as published in the June issue of Poultry USA

A new way to do business

The operation is a significant departure from the established Poultry supply chain model in the U.S.
Founded in 2016 and designed to exclusively supply Costco, Lincoln Premium Poultry (LPP) was set up in Fremont, Nebraska, in collaboration with the Issaquah, Washington, retailer to operate and manage the asset and the business on Costco’s behalf. In practice, it is a miniaturized version of a traditional poultry integrator with only one customer: Costco.

In March 2020, the 400,000-square-foot poultry processing facility located in Fremont employed more than 1,000 and was running three lines processing about 1 million birds per week. At the time, it just launched a second shift on one line. Its plans call for running two shifts on three lines and processing more than 2 million birds per week by the end of 2020.

Costco’s interest in poultry

According to Jessica Kolterman, LPP’s director of corporate and external affairs, Fremont is currently supplying all fresh chicken products sold under the store’s Kirkland Signature brand — including the famous rotisserie chicken — to Costco’s stores in Omaha and Lincoln, Nebraska. LPP will eventually supply chicken for all its stores in the western U.S.
LPP, she said, gives Costco more than a chicken raised to a specific weight and size for rotisserie roasting. Costco has tremendous influence in how the bird is raised, housed and fed; the level of animal care; the processing environment and LPP’s employment practices. Moreover, the new poultry processing operation is utilizing top-of-the-line Marel equipment from start to finish in order to maximize bird welfare and minimize labor needs.

Inside the plant

The most difficult part in getting off the ground, Shafer said, was taking the entire LPP operation from the drawing board to reality. This meant literally building an integrated poultry enterprise from the ground up, as well as staffing it up as soon as the plant opened its doors, and figuring out all the new, high-tech equipment and its affiliated software.

The processing plant is outfitted almost entirely by Dutch food processing equipment company Marel. When its birds arrive in an indoor lair age area, they are moved in their transport modules onto a conveyor belt, which takes them into a controlled atmosphere stunning (CAS) system. The CAS is used to enhance bird welfare and reduce stress on workers.

After slaughter, plucking and evisceration, the birds are air chilled. Kolterman said the practice is more sustainable because it uses less water than conventional chilling. Additionally, consumer feedback indicates a preference for the taste and texture of air-chilled chicken meat.

Birds then move past a high-speed IRIS camera that informs automated deboning operations further down the processing line. Some are wrapped and injected with seasoned brine for rotisserie roasting. Others are cut up and packaged in Costco’s so-called saddle packages. After processing, robot arms help with stacking and loading.

Everywhere, special attention is paid to sanitation. Evisceration and slaughter are divided from the processing floor. Employees pass through a boot wash and wash their hands before and after working in the processing area. Corridors with windows run throughout the plant to both allow visitors to see into the plant and to separate its departments.

Boosting the local economy

Kolterman said LPP is attracting employees from the Fremont and Omaha areas, and it is making a broader impact on the regional economy. Between April 2019 and February 2020, it added more than 800 employees. Workers are paid a higher starting wage at LPP than at competing manufacturing facilities, which is motivating other nearby employers to raise their pay in order to compete.

Moreover, the business is pumping cash directly into the local economy by creating new demand for products and services and by putting existing businesses and contractors in the region to work. She estimates the total economic impact for the region to be about $1.2 billion annually, or about 1% of the Cornhusker State’s gross domestic product.