The $5 Chicken.

For lunch today I went to the Winn Dixie by my work, and purchased at whole rotisserie chicken for $5. As far as value/deliciousness ratios go this one is pretty high up there right along side $2 fried rice, and at the complete other end of the spectrum from $750 caviar & lobster tail pizza.  I love these chickens, rip that bitch up, throw it in a roll with some mayo and I am happy. That being said, the math on these just somehow doesn’t add up. I pay $8.99 for a fresh whole chicken, but for $4.00 less I can have the entire chicken, seasoned, cooked & ready to rock. Does it really cost less than $5 to raise a chicken from egg to oven – or is there some business trickery at play here?

The most basic form of business is buy/making something, and then selling it for more than it costs you to make. Simple simple. How businesses define this pricing can vary including:

Mark-up pricing:

Wholesale a good costs x, so we sell it at x + 50%.

Market pricing:

Let’s look at what our competitors are selling it for and then match/beat them.

Benefit/Cost pricing:

What is the benefit the consumer gains or punishment the consumer avoids by buying this.

 

The chicken finds itself falling into the benefit/cost pricing category, but maybe not in the way you would think. The bane of American supermarkets is wastage, with an estimated 30-40% of food produced never being consumed, supermarket wastage not only drives prices up, but ethically stretches earth’s resources more than necessary increasing pollution and waste.

The key to this argument is that rotisserie chickens are NOT a profit generating venture for most supermarkets. They are, however, a loss reduction strategy. Take these numbers for example:

Situation #1:

A supermarket buys a whole chicken raw for $3.00, and spends $1.00 worth of labor time receiving and placing the product in their store, they then in turn sell the chicken for $8.99, for a clean $4.99 profit. This is the best case scenario.

Except it’s not the only situation. What if this fresh chicken doesn’t sell? Fresh chickens have a life span of about 5 days where they can sit in the cooler and be available for sale. Once these 5 days are up the supermarket either trashes it, OR cooks it, extending the life by another 3-4 days.

Situation #2:

The chicken is not sold, and has 1 day left before it turns bad. Time for baste it, stick it and put it in the rotisserie! For a labor, electricity and packaging cost of $2.00, the supermarket can then sell their chicken for $5.00. It make sense for them to spend $2.00 to gain $5.00, rather than do nothing and lose the initial $3.00. This now cooked chicken is hot and ready to go for consumption, this state preserves it for a day or so, then it gets moved down the line and onto:

Situation #3:

The Deli. You want some chicken potato salad? Yeah that chicken in there is quite literally the stuff they would have thrown away if you didn’t come and buy it. Oddly enough this is some of the highest margin products in the store, made largely using products that are at the end of their life.

Anyway, I have the 2nd half of a chicken to get through, so I will leave it there! Thanks for reading.

 

 

 

 

 

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