SEATTLE – At Costco’s shareholder meeting earlier this year, 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.
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.
Sales of organic food has jumped from $11.13 billion in 2004 to $35.95 billion in 2014, according to the Organic Trade Association, which represents the supply chain from farmers to retailers.
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.
The retailer, based outside Seattle, for instance, has a poultry plant in Alabama dedicated to raising chickens for the fresh meat and rotisserie chickens it sells.
It started working with a Mexican vendor two years ago to get wild shrimp from the Sea of Cortez, allowing the retailer to diversify from relying on shrimp caught in Thailand, where human trafficking and slave labor in the fishing industry are pervasive.
And in the last year, Costco bought cattle and is contracting with owners of organic fields in Nebraska to have ranchers there raise the livestock to ensure supply for its organic ground beef program.