The One Food Department Boosting Costco's Profits In 2024
From the $4.99 rotisserie chickens to the famous food court hot dog, Costco members often have meat on the mind when they walk into the warehouse. With the price of groceries rising over the past several years, especially in the case of beef — which costs 32% more since 2019 due to supply issues, according to Time — it's only natural that many members opt to buy their meat in bulk from the wholesaler. After all, Costco is committed to customer satisfaction, largely through keeping prices low. And that method seems to be paying off, as the company's meat department is growing steadily, thanks in part to prioritizing affordability.
During Costco's third quarter earnings conference call for 2024, which took place on May 30, the company's executives offered some insight into what's driving their increasing sales, which reached $57.39 billion during the fiscal quarter, an increase of 9.1% from the previous year's, according to the transcript prepared by The Motley Fool. When it comes to groceries, Costco President and CEO Ron Vachris praised the meat department's performance, highlighting a few key products boosting the company's food sales. In particular, wagyu beef and chicken breast are among some of the prize items bringing in the bacon. (And if you've had any concern about Costco's wondrously cheap hot dog costing more, don't worry; EVP and CFO Gary Millerchip was quick to clear up media speculation, confirming that the inflation-proof $1.50 price remains safe — dog bless.)
From chicken to beef, meat's selling well at Costco
In the company's earnings call on Thursday, Costco's meat department received praise from President and CEO Ron Vachris. While he didn't get into the fine details of how much money the department is bringing to the table, he did speak to its overall growth — and the products driving it.
When answering a question from Peter Benedict, an analyst at Robert W. Baird and Company, about interesting observations of member behavior, Vachris reflected on meat as opposed to other grocery areas. "You know, it's a very healthy environment from what we see from our members right now," he said. "If you take a category such as our meat department, which is growing very nicely, a lot of volume being driven in ground beef, and our new everyday lower price on boneless, skinless chicken breast, [is] really driving a lot of volume in us there, while wagyu beef and prime are growing at a great clip for us as well."
Clearly, the wholesaler's meat department is doing well, thanks to its varied offerings. Costco sells a wide range of poultry cuts, from the aforementioned boneless, skinless chicken breast and thighs to drumsticks and wings. Members can even opt for air-chilled chicken, which involves water-free processing for improved flavor and texture. In terms of red meat, Costco carries USDA Choice and USDA Prime beef — the latter being particularly popular and the highest grade of the eight that the USDA issues — in all kinds of cuts.
What's worth buying at Costco's meat department?
Wondering which meats are worth buying while shopping at Costco? Of course, the spotlight's on chicken breast, wagyu beef, ground beef, and specifically prime (beef or rib), and the items within those categories seem to already be best-sellers among members. But there are a few things to note while shopping, especially when thinking about what to snag and what to skip.
When you're scoping out Costco's meat department on your next shopping trip, note that there's a more cost-effective way to buy ground beef than purchasing the regular Kirkland Signature packages. Turns out, you can head to the counter and ask the butcher for ground beef chub, which is larger, leaner, and cheaper by the pound. When it comes to buying meat in bulk, the lower cost goes a long way.
While Costco has a staggering range of steaks in all cuts under the sun, from sirloin to ribeye, the mechanical tenderizing used for many of the wholesaler's steaks makes them a bit risky when it comes to bacteria. If you prefer your steak cooked rare or medium rare, you may want to skip buying certain smaller cuts there. However, not all of Costco's steaks are processed this way, so check each package's labeling to see which cuts might need to be cooked to higher temperatures. Either way, there are still plenty of poultry and beef products worth adding to your cart.