To boost its supply of organic foods, Costco is trying something new: It’s working with farmers to help them buy land and equipment as it struggles to keep pace with customer demand.
Janet I. Tu
April 1, 2016
At Costco’s recent shareholder meeting, CEO Craig Jelinek touted the vast amounts of food the company sold last year, from 83 million rotisserie chickens to $6.1 billion worth of produce.
As for organics, one of the fastest-growing categories in food sales and one in which Costco has become a major player?
“We cannot get enough organics to stay in business day in and day out,” Jelinek told the gathered investors.
What Costco is doing to build its food supply
Among the initiatives:
• Lending money to farmers to buy land to grow organics
• Raising chickens at its poultry plant in Alabama
• Working with Mexican vendor to get wild shrimp
• Contracting with Nebraskan farmers to raise cattle on organic fields
So to boost its supply, Costco is trying something new: It’s working with farmers to help them buy land and equipment to grow organics.
The effort is still in its infancy. So far, Costco is working with just one partner, loaning money to help San Diego-based Andrew and Williamson Fresh Produce buy equipment and 1,200 acres of land in the Mexican state of Baja California.
But Costco is looking at expanding the initiative. The idea is to ensure a greater supply of organic foods at a time when demand is soaring but supply has not kept up.
While other retailers might have loan programs for suppliers to upgrade equipment or offer financial incentives such as advance payments or long-term contracts, helping farmers buy land to grow organics appears to be unusual in the industry.
The nascent program joins a list of other Costco food initiatives that try to ensure the warehouse giant can meet the voluminous demand of its customers.ff