Costco, well-loved by hot dog enthusiasts, has no plans to increase the price of its popular hot-dog-and-soda combo. Since its introduction in the mid-1980s, the combo has consistently sold for $1.50 despite inflation, which would otherwise push the price to approximately $4.40 today. Jamie Loftus, author of "Raw Dog: The Naked Truth About Hot Dogs," explains that the appeal lies in its delicious taste and affordable price, which stays true to the hot dog’s history as a low-cost food for the masses.
Speculation about a potential price hike began in March after Richard Galanti, then Costco’s CFO, mentioned it was “probably safe for a while,” causing some concern among customers. However, Gary Millerchip, Galanti’s successor, confirmed in a recent earnings call that the $1.50 price tag remains unchanged, much to the relief of the chain’s many fans. This decision is seen as a strong PR move for Costco, reinforcing its customer loyalty.
Despite the need to raise prices on some food court items, like the chicken bake and sodas, Costco's $4.99 rotisserie chicken and hot dog combo has remained immune to price increases. These items exemplify a loss-leader pricing strategy, where products are sold below market cost to attract customers who then purchase more profitable goods. Revenues from other areas of Costco help offset these low prices, as highlighted in previous earnings calls.
The company's sustained commitment to low prices extends to other products as well. Millerchip recently noted that overall inflation was flat in fresh foods and that slight food and sundries inflation was balanced by deflation in nonfoods, leading to price reductions in items like shrimp and pine nuts. According to Brendan Witcher from Forrester Research, Costco essentially “buys” customer loyalty with this strategy, keeping prices low to maintain a loyal customer base.
Costco’s hot dog combo, which sold nearly 200 million units in the 2023 fiscal year, has cultivated a dedicated following, inspiring memes and fan-made merchandise. The combo's origins trace back to 1984 with Hebrew National selling hot dogs outside a Costco store in San Diego before Costco began producing its own hot dogs in 2008 to reduce costs.
The food court experience has become a staple of Costco culture, akin to buying food at a movie or amusement park. Witcher believes that altering this tradition could risk losing loyal customers, emphasizing the cultural connection Costco has built. Another part of the combo's allure is the anecdote involving the resistance to price increases by former CEO Craig Jelinek, who recalled being told by co-founder James Sinegal, "If you raise the effing hot dog, I will kill you." This story, along with its consistent quality and price, adds to the Costco hot dog’s enduring legend.