(CNN Business) — In 2019, Costco opened a $450 million poultry processing plant in Nebraska to produce millions of its basic $4.99 Kirkland Signature rotisserie chickens.
It was an unusual step for a retail company, but a sign of how valuable rotisserie chickens are to Costco’s business. The company has sold them for $4.99 for more than a decade, lower than most rivals, and uses them as a selling point to lure customers into stores. Costco sold 106 million cooked birds last year.
But Costco is now facing a lawsuit from two shareholders who allege the company and its top executives violated animal welfare laws and, in the process, breached their fiduciary duties. The suit questions how far Costco has gone to keep its key item cheap.
“Costco illegally neglects and abandons its chickens,” says the lawsuit, filed this month in Seattle. Company executives, the suit says, “caused, [son] knowingly and knowingly ignored the clear signs of Costco’s continued mistreatment of chickens.”
Costco did not immediately respond to a request for comment on the lawsuit.
As part of the operation, Costco recruited farmers in the area to raise broilers that would be shipped to the Nebraska processing plant.
But the lawsuit alleges that Costco intentionally raises these broilers too large to fend for themselves on factory farms and that “disabled birds slowly die of starvation, injury and disease.”
And it follows accusations from another animal rights group about Costco’s treatment of its chickens.
In 2021, Mercy for Animals filmed undercover scenes of injured chickens in a crowded factory on one of the farms. The video led to a story by a prominent New York Times opinion writer titled “The Ugly Secrets Behind Costco Chicken.”
In response to the article, Costco defended its treatment of animals, saying it adheres to standards developed by the National Chicken Council, a trade association.
But Costco’s practices could hurt demand for rotisserie chickens, the lawsuit claims, and damage its corporate reputation.
“As more consumers learn about the mistreatment of Costco’s chickens, the benefits to be gained from using loss-making rotisserie chickens to drive customer traffic and purchases… will disappear or be greatly diminished because consumer preferences consumers not to buy illegally or unethically manufactured products will prevail over the appeal of ‘cheap’ chicken”.