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Rotisserie Chickens Still Have Grocery Industry Spinning

It is a stratified era in American political and cultural thought, but there does seem to be one thing we all can agree on: rotisserie chickens (well, except for you, vegans: sorry). Last year, Americans purchased over 625 million of the pre-cooked birds, with Costco alone accounting for 87 million sold. In fact, one out of every two Americans purchased one in the last year.

Introduced in the mid-1990s (yes, we used to cook our own chickens before then—tell your grandkids!), the rotisserie chicken has quickly and quietly become a grocery staple, one whose price point is protected like the nuclear football. In fact, for many years, it has actually been cheaper to purchase a pre-cooked chicken than a raw one, which belies common sense and typical grocery industry practices.

So let’s follow the rotisserie chicken crossing the road, apply some grocery industry market research along the way, and arrive at a better understanding of this seemingly counterintuitive pricing strategy. And, yes, at this point it is fair to wonder if we have a thing for chicken.

Loss Leaders are NOT for Losers

There has been much speculation through the years about the relative affordability of rotisserie vs. raw chicken.  Unfortunately, popular perception (inspired by publications ranging from Reader’s Digest to KCET) only has it half right, arguing that the chickens, like other market deli food, are near-expiration items that the store sells to avoid taking a complete loss. Sure, there is some truth in this—word to the wise, always avoid deli ambrosia salad—as stores, with their razor-thin margins, loathe waste.

But this explanation elides the vast infrastructure and strategy stores have built around this item, not just serving it up to avoid throwing out a rotting, uncooked bird, but building supply chains and efficiencies to ensure customers don’t cross the road to get to the cheaper chicken.

The truth is, rotisserie chickens are what we call loss leader--items that grocers willingly sell below market in order to draw in foot traffic and inspire purchases of higher margin items. Sure, stores will take a loss on the chicken, but they hope to make up for it with side fare, alcohol and beverages, and any impulse items purchased on the way through.  

As one grocery VP of deli articulated, “If they get a chicken, a salad, and maybe they pick up a bottle of wine—now we’re really talking.”

Indeed, if a rotisserie chicken dinner has become part of a customer’s weekly routine—as it has for many an American family—they will be in-store once a week, regardless of whether they have other items on their list. In an era when foot traffic is at a premium, stores simply cannot afford to raise their prices and risk killing the golden goose.

Costco CFO Richard Galanti was candid about their margins in a recent interview with the Seattle Times: “I can only tell you what history has shown us: When others were raising their chicken prices from $4.99 to $5.99, we were willing to eat, if you will, $30 to $40 million a year in gross margin by keeping it at $4.99. That’s what we do for a living." Yes, you read that correctly. Costco is eating a multi-million dollar loss to keep you affordably fed, and that loss can skyrocket exponentially in times of short supply (anybody remember the bird flu?).

But Costco is not alone in their myopic insistence on keeping prices steady. Vice President of Kroger Deli and Bakery Russ Richardson admits, “We are relentlessly focused on keeping that price point. It’s the hallmark item.”

Thus it is no coincidence or accident that after Amazon acquired Whole Foods, rotisserie chickens were one of the first items on which Bezos and his boys cut prices.


The Life of Grocery’s Golden Goose

In order to minimize loss (no, not maximize profit haha) the journey of a rotisserie chicken is brief and marked by efficiency. They are generally raised to 4 weeks old, though Costco in its bid to have the biggest chickens on the block extends that all the way to 11 weeks. They are slaughtered offsite, stripped, and pre-seasoned before transport—interestingly, this qualifies them as processed food, even though most customers do not think of them in that way. All of this processing is typically the work of grocery vendors such as Tyson, though Costco has already began construction on their own $300 million Nebraska (literally the middle of America, an ideal distribution point) processing plant.

Other efficiencies stores are attempting to build into their rotisserie chicken game include, according to the Wall Street Journal: trimming supply-chain costs, cooking chickens more efficiently, and shrinking waste.

The waste shrinking has everything to do with timing. Once they arrive in the store, seasoned birds are scheduled to be roasted on-site at peak demand points. The items have a four-hour shelf life once roasted and sitting under heat lamps, which grocers schedule out for prime chicken shopping time, generally 3PM-7PM.

Some stores keep them in the front to inspire quick trips in and out, and also bombard customers at checkout with the sweet aromas of roasted chicken. Others, like Costco, count on shoppers marching clear across their vast warehouse on an almost ½ mile journey to secure and purchase their bird, no doubt picking up a crate of soymilk and a vat of Chapstick along the way. Either way, rotisserie chickens are a central part of every grocer’s strategy, and they have long ago figured out ways to ensure customers don’t leave with just that one upside-margin item.

That’s how they get you, and the people have been eating it up. The internet, of course, is replete with rotisserie-centered recipes, tips, tricks, and hacks for busy Americans looking for a healthy, home-ish cooked meal. From the highbrow Bon Appetit to popular favorite  Food Network to millennial mashup Buzzfeed, everybody has ideas for how to turn the clam-shell wrapped bounty into a complete meal.

What Market Research Shop-alongs Can Do for the Humble Chicken

Within the grocery industry market research toolkit, there are several methodologies that would help a grocer understand how to maximize their chicken potential without running afoul of customers expectations. Obviously market research shop-alongs would be a great place to start. By following your ideal consumers on their shopping venture, grocers begin to understand how they interact with specific products. This can be invaluable when determining where in the store to place the golden goose chickens and deciding which items to stock near them, particularly during testing and validation research phases. 

Perhaps a “complete meal station” could be optimized around a rotisserie island, including wine, select refrigerated deli items, and even a few choice desserts. Increase basket share by understanding which items customers bundle, which ones grab them in the last minute, and which ones flat out don't fit in. 

Because though grocers may disagree on some things, they share the exact same nightmare: a line of customers extending out their store, each holding nothing but a clam shell rotisserie chicken. Sleep better, put in the market research.

2017 Beverage Industry Report

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It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout.