Costco’s new chief financial officer, Gary Millerchip, reassured customers that the price of the $1.50 hot dog-soda combo is safe despite rising inflation. This announcement came during his first earnings call with analysts, following the retirement of Richard Galanti, Costco’s long-serving CFO. Speculation had arisen about the future of the $1.50 hot dog deal, given other companies such as Trader Joe’s and Planet Fitness raising prices on their long-standing deals.
The $1.50 hot dog combo has remained the same price since 1985, defying inflation that would have made it nearly three times as expensive today. This pricing strategy is known as a loss-leader, where Costco is willing to sell the hot dogs at a loss to attract and retain customers. With other companies cutting prices to appeal to inflation-weary shoppers, it would be an odd time for Costco to consider raising prices.
The $1.50 hot dog serves as a powerful marketing tool for Costco and is synonymous with the company’s brand. Co-founder Jim Sinegal highlighted the importance of the hot dog, emphasizing that it is something the company does not want to mess with. Former CEO Craig Jelinek recalled Sinegal once saying, “If you raise the effing hot dog, I will kill you. Figure it out,” demonstrating the significance of the hot dog within the company.
Costco offsets the losses from the $1.50 hot dog by increasing prices on other items at its food courts, such as pizzas, and cutting costs elsewhere. Additionally, the company has recently added chocolate chip cookies to its food court menu, with the $2.49 double chocolate chunk cookie being a success. This diversification of the food court menu allows Costco to continue offering value to its customers while maintaining its iconic $1.50 hot dog combo.
