Costco’s $1.50 Hot Dog Combo Remains ‘Sacrosanct’ Amidst Record-High Inflation

In the midst of economic uncertainty, one thing remains true — Costco will not be raising the price of its $1.50 hot dog and soda combination anytime soon.

The Wall Street Journal reported on Thursday that Richard Galanti, chief financial officer at Costco, assured customers that they can still rely on seeing the incredible deal that they’ve come to love since 1985 inside its stores across America.

“That $1.50 price point has been sacrosanct from the very beginning,” Gallanti told the paper.

The Bureau of Labor Statistics’ Consumer Price Index report announced on Wednesday that inflation rose 9.1% between June 2021 and June 2022, marking a 40-year high.

Costco has raised prices on other food court items, but the CFO admitted that the company’s profits in that part of the store are practically nonexistent.

“Needless to say we aren’t making a lot or any money,” Galanti said about Costco’s food courts. “At the end of the day, the whole value of our warehouse club includes a great value on that hot dog and soda.”

The Journal also cited the classic tale about the time that Costco’s co-founder, Jim Sinegal, comedically threatened to murder Costco CEO W. Craig Jelinek who suggested raising the price in order to recoup revenue.

Sinegal allegedly told the executive, “If you raise the effing hot dog, I will kill you. Figure it out.”

Had the price of the combo kept up with inflation, customers would be currently paying $4.13, per the Journal.

Costco has been so intent on keeping the price-point low that it has opened two factories that produce nothing but hot dogs to help keep costs down.

“What we figured out we could do is build our own hot dog-manufacturing plant (in Los Angeles) and make our own Kirkland Signature hot dogs,” Jelinek said after the plant opened in 2011. “Now we are doing so much hot dog business that we’ve opened up another plant in Chicago.”

“By having the discipline to say, ‘You are not going to be able to raise your price. You have to figure it out,’ we took it over and started manufacturing our hot dogs,” he said at the time. “We keep it at $1.50 and make enough money to get a fair return.”

In 2009, Costco’s assistant vice president of publishing, Dan Fuller, wrote, “Holding a price that steady for that long sends a clear message about what is possible when you decide to operate your business model on a ‘cost plus’ basis instead of a ‘what the market will bear’ basis.

 


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