A hot dog and drink combo at Costco

The Costco Hot Dog is a 1/4lb hot dog sold at the international warehouse club Costco's food courts. It is notable for its price, which has remained steady at $1.50 in a combo deal including a soda at United States locations since its introduction in 1984. That price has become increasingly low relative to inflation and spawned a cult following.

History

A Costco food court menu, featuring the hot dog and soda combo deal sign

The Costco hot dog was introduced to food courts in 1984,[1] one year after Costco's opening in 1983.[2] The original hot dog was made by Hebrew National,[3] and was sold at a hot dog cart outside a Costco location in San Diego. The price was set at $1.50 at its introduction, and has remained at $1.50 ever since.[1] The product varies across countries; the U.S. version consists of a Kirkland brand wiener, some warehouses selling it with a sesame bun, some selling it with a plain bun.[4] It is sold as part of a combo deal with a 20 US fl oz (590 mL) soda.[5]

In 2008, Costco began using its own hot dog factories, reducing supply chain costs.[5] A Costco meat processing facility in Tracy, California, that had been around since 2004[6] began producing hot dogs in 2011, and produced both the hot dogs sold in the food court as well as smaller hot dogs sold in packs. The switch also ushered in the usage of non-kosher beef. Another facility was opened in Morris, Illinois in 2018.[7]

The soda fountains at the Costco food courts were stocked with Coca-Cola products until 2013, when Costco switched to Pepsi products as a cost savings measure for the combo.[8]

As of 2018, Costco sold a yearly average of 135 million hot dogs,[9] more than every Major League Baseball stadium combined.[3]

In 2022, Costco CFO Richard Galanti stated that Costco intends to keep the combo deal's price constant "forever."[10]

International versions

In the U.S., the hot dog and soda combo deal costs $1.50 (USD). In Australia and New Zealand, the hot dog is made of pork and is sold with a large soda for $1.99 (AUD/NZD).[11] In Canada, the price for a hot dog and soda with refills is C$1.50.[12] In Mexico, the hot dog is made of 100% beef and includes a drink (with refills) for MXN$30.[13] In the UK, the hot dog is also made from beef and customers also get a drink (with refills) for £1.50.[14] In Taiwan and Japan, the hot dog is made of pork. Japan's price for their 120 g (4.2 oz) hot dog and refillable 600 ml (20 US fl oz) drink is ¥180.[15]

Cultural impact

The hot dog and soda combo deal has developed a cult following.[16] Several t-shirt designs are sold online exist that celebrate the food court sign advertising the combo.[10]

In 2009, the Seattle Times asked Costco co-founder (and then-CEO) Jim Sinegal, "If [the price of the hot dog] ever goes up, what will it mean?" Sinegal replied, "That I'm dead."[17]

Craig Jelinek, the current CEO of Costco, revealed in 2018 that he approached Sinegal about raising the price of the hot dog combo, saying, "Jim, we can't sell this hot dog for a buck fifty. We are losing our rear ends." According to Jelinek, Sinegal replied, "If you raise the effing hot dog, I will kill you. Figure it out."[9]

Sam's Club, a Costco competitor, reduced the price of its hot dog and soda combo deal to $1.38 in November 2022 in an attempt to compete with the Costco hot dog.[18]

Analysis

Several explanations exist as to why Costco chooses to continue to sell its hot dog combo at an unusually low price point.

When asked why the price of the hot dog was significant to him, Jim Sinegal said, "Because everybody talks about it. People look at that hot dog and say a buck fifty, this is unbelievable." He continued, "We're known for that hot dog. That's something you don't mess with."[17]

According to David Fuller, assistant vice president of publishing, "Costco wanted to prove that a business can operate on a fair markup and still pay all of its bills. 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." Costco vice-president Bob Nelson stated that "It epitomizes the value that we stand for."[19]

Some commentators and employees have called the hot dog a loss leader, drawing in enough customers to compensate for lost profits.[20] Costco CFO Richard Galanti did not directly confirm or deny this theory, but commented that "Needless to say we aren't making a lot or any" profit on food court products.[21]

Some have also theorized that the popularity of the food court, which is located near the entrance at Costco locations, creates a welcoming atmosphere, luring in more customers and encouraging customer retention.[20][22]

See also

References

  1. 1 2 Nowak, Claire (March 26, 2019). "The Real Reason Costco's Hot Dogs Cost $1.50". Reader's Digest. Archived from the original on August 29, 2023. Retrieved August 29, 2023.
  2. ↑ Gleeson, Scott. "Don't worry, Costco commits to $1.50 hot dog and soda combo price — maybe 'forever'". USA TODAY. Archived from the original on July 7, 2023. Retrieved August 29, 2023.
  3. 1 2 Rossen, Jake (June 8, 2018). "The Enduring Enigma of Costco's $1.50 Hot Dog and Soda Combo". Mental Floss. Archived from the original on August 29, 2023. Retrieved August 29, 2023.
  4. ↑ Peterson, Lucas Kwan (January 31, 2023). "The Costco hot dog combo has been undercut by Sam's Club by 12 cents. Which is better?". Los Angeles Times. Archived from the original on August 29, 2023. Retrieved August 29, 2023.
  5. 1 2 Mae, Angela (June 16, 2023). "How Much Does a Costco Hot Dog Actually Cost Amid Inflation?". Yahoo Finance. Archived from the original on August 29, 2023. Retrieved August 29, 2023.
  6. ↑ "Costco constructs meat processing plant". FleetOwner. July 1, 2004. Retrieved September 13, 2023.
  7. ↑ De Avila, Joseph (July 15, 2022). "Behind the $1.50 Costco hot dog combo that defies inflation". The Virginian-Pilot. Retrieved September 13, 2023.
  8. ↑ Klineman, Jeffrey (January 31, 2013). "PepsiCo's In The Club… Store, that is, Capturing Costco Food Service Account". BevNET.com. Retrieved September 13, 2023.
  9. 1 2 Matthews, Todd (April 18, 2018). "Costco CEO Craig Jelinek on Shareholders, Costco.com, and Hot Dogs". 425Business.com/. Archived from the original on August 31, 2023. Retrieved August 29, 2023.
  10. 1 2 Vega, Nicolas (September 26, 2022). "'Lightning just struck me': Why Costco's CFO says the price of the $1.50 hot dog and soda combo is 'forever'". CNBC. Archived from the original on August 29, 2023. Retrieved August 29, 2023.
  11. ↑ "Costco". www.costco.com.au. Archived from the original on August 29, 2023. Retrieved August 29, 2023.
  12. ↑ Belmonte, Lisa. "Costco Says The Price Of Hot Dogs At The Food Court Will Stay The Same 'Forever' – Narcity". www.narcity.com. Archived from the original on August 29, 2023. Retrieved August 29, 2023.
  13. ↑ Byrne, Matt (August 30, 2022). "Reddit Has Serious FOMO For Costco Mexico's Hot Dogs". Mashed. Archived from the original on August 29, 2023. Retrieved August 29, 2023.
  14. ↑ Duffy, Kate; Nolan, Beatrice. "We tried a Costco hot dog for the first time. Here's how it compares with the other food court staples on the menu". Business Insider. Archived from the original on August 29, 2023. Retrieved August 29, 2023.
  15. ↑ No, Michelle (August 13, 2017). "Costco Japan Exists And It Looks Like A Damn Paradise". BuzzFeed. Archived from the original on August 29, 2023. Retrieved August 29, 2023.
  16. ↑ Allcot, Dawn (August 5, 2023). "Are These 8 Costco Items With Cult Followings Worth the Hype (and Money)?". Yahoo Finance. Archived from the original on August 29, 2023. Retrieved August 29, 2023.
  17. 1 2 Allison, Melissa (November 15, 2009). "Complete Q&A with Costco founder, CEO Jim Sinegal". The Seattle Times. Archived from the original on August 29, 2023. Retrieved August 29, 2023.
  18. ↑ Case, Brendan (August 17, 2023). "Sam's Club's War Against Costco Started With $1.38 Hot Dog Combo". Bloomberg.com. Archived from the original on September 3, 2023. Retrieved August 29, 2023.
  19. ↑ Ihnat, Gwen (April 11, 2018). "Costco loses money every time it sells a $1.50 hot dog and doesn't care". The Takeout. Archived from the original on August 29, 2023. Retrieved August 29, 2023.
  20. 1 2 Bedell, Malcolm (April 15, 2019). "This Is Why Costco's Hot Dog Combos Really Cost $1.50". Mashed. Archived from the original on August 29, 2023. Retrieved August 29, 2023.
  21. ↑ De Avila, Joseph (July 14, 2022). "The $1.50 Costco Hot Dog Combo That Defies Inflation". Wall Street Journal. ISSN 0099-9660. Archived from the original on July 8, 2023. Retrieved August 29, 2023.
  22. ↑ Cain, Áine. "Why Costco food courts have charged $1.50 for hot dogs since 1985, according to employees". Business Insider. Archived from the original on August 29, 2023. Retrieved August 29, 2023.
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