In Korea, Costco To Sell 100% U.S. Beef

The U.S. Meat Export Federation (USMEF) announced that Costco Wholesale Corp. (COST), on February 13, began transitioning the chilled beef it sells in South Korea from the Australian variety to 100% U.S. beef product.

Costco’s decision to offer 100% chilled U.S. beef comes after years of efforts from the USMEF to convince stores that U.S. beef will sell just as much, or even possibly more, than Australian beef, saying consumer confidence in the safety of U.S. beef is growing again.

Those conversant with the beef market would recall the case of bovine spongiform encephalopathy, or mad cow disease in the U.S. around 2003, which led to many countries placing partial or complete bans on imports of U.S. beef. South Korea halted custom clearance for U.S. beef, effectively closing its borders to all U.S. beef. A 2006 attempt to reopen U.S. beef imports, which was to be restricted to boneless beef from cattle under 30 months of age, failed because the South Korean government found bone chips in beef imports at the time. It wasn’t until 2008 that South Korea reopened its borders to various cuts of U.S. beef after the two countries agreed on sanitary rules.

Costco has already transitioned to 100% chilled U.S. beef at two of its warehouses in South Korea, where it currently owns 13 locations. The transition will come to the other warehouses in May. The company plans to open two new warehouses in the region this year.

According to Fortune Magazine, Costco is the world’s biggest seller of (USDA choice) beef. After an E.coli outbreak in 1993, Costco built its own beef-processing plant to ensure that the beef it sells meets safety standards. Beef is tested every 15 minutes at the plant. Moreover, the retailer also has an ongoing pilot project of selling its own cattle herd in Nebraska.

If the pilot project succeeds and Costco begins to produce beef, the U.S. beef it sells in South Korea, and other international markets, could be its own. Perhaps this will have some tax benefits for Costco, as an exporter, if the proposed border adjusted tax ever sees the light of day, considering that the company generates up to $4.5 billion from sales of meat a year.


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