Costco says it will keep hot dog combos at $1.50. Here’s how: NPR

Customers wait in line at the Costco food court in Hawthorne, California.

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Fear not, hot dog lovers: Costco doesn’t plan to raise the price of its beloved hot dog anytime soon.

The retailer has been selling the hot dog and soda combo for $1.50 ever since First lists In the mid-eighties.

The price has remained constant over the years despite inflation – otherwise it will be from Closer to $4.40 these days.

“People love it because it’s delicious and it costs fifty bucks, and it’s actually very faithful to the history of what a hot dog is: a low-priced food for the masses that’s perfectly good,” explains Jimmy Loftus, the author. to Raw Dog: The Naked Truth About Hot Dogs.

Speculation that the cost of the iconic collection might change began in March after Richard Galanti, the company’s then chief financial officer, said: He told Bloomberg That it “may be safe for a while” — not necessarily the guarantee every hungry Costco member wanted to hear.

His successor, Gary Millerchipp, clarified matters in his first letter Quarterly earnings call Thursday.

“To clear up some of the recent media speculation, I also want to confirm that the $1.50 hot dog price is safe,” Millership said.

The soundbite has since gone viral on social media, providing welcome relief to many of the chain’s hot dog fans.

“It’s a good PR move for Costco not to change that price,” Loftus says, adding that it has a humanitarian impact for the company.

“It’s a PR blow for them, as this story always has been,” Loftus told NPR. “It’s like, ‘No, we’re not going to change the price. We’ve got your back.'”

How does Costco keep hot dog prices steady?

Costco had to raise a cost Some basic nutrients – Chicken Bread and 20oz Soft Drinks – in 2022, at the height of recent food price inflation.

However, the $4.99 rotisserie chicken remained immune.

This and the hot dogs are what experts have described as an example of loss-based pricing — a strategy in which companies sell certain products at a price below market cost in order to lure customers in the door and, ideally, put more profitable items in their carts.

Galanti had said in previous earnings calls that revenue from Costco’s other segments helped keep restaurant prices low, according to The hill.

Executives offered similar explanations on last week’s earnings call.

Millership said third-quarter inflation was “basically flat” in fresh foods, and that “mild” inflation in food and miscellaneous items was “offset by some contraction in non-food items,” led by lower shipping costs for appliances, sporting goods and furniture. .

The chain was also able to lower prices on some items, including Kirkland Signature Frozen Shrimp and Pine Nuts ($29.99 to $24.99).

When it comes to hot dogs, Brendan Witcher, vice president and principal analyst at Forrester Research, told NPR via email that Costco is essentially “buying” customers’ loyalty at whatever price they’re not willing to charge above $1.50.

It’s not an unusual practice in retail, he said, pointing to the practice of stores giving customers a 5% discount on online orders just for registering with their email address.

“The retailer ultimately eats that cost to maintain customer loyalty (no pun intended),” he added.

Hot dog combo traditions explained

The company said earlier this year that it had sold Nearly 200 million hot dog and soda collections in fiscal 2023 alone.

The low cost of Costco’s quarter-pound dogs — combined with the chain’s much-discussed commitment to keeping it that way — has earned them a cult following over the decades, leading to a proliferation of… Memes And Fan-made merchandise.

The story of the Costco dog dates back to approximately 1984, when Hebrew National – Costco’s original sausage supplier – Selling hot dogs from a shopping cart Outside one of its stores in San Diego. (The company began operating its own sausage factories in 2008, to cut supply chain costs.)

Thus began the evolution of the Costco food court, where shoppers could also find food such as pizza slices and chocolate chip cookies.

This part of the experiment essentially enabled Costco to create its own form of consumer culture, Witcher says.

“No one buys hot dogs and soda and puts them in grocery bags to eat tomorrow,” he said. “The quick-service restaurant is part of the adventurous culture that Costco has created, just as you would buy food and drink at a movie theater, amusement park, or a concert.”

He sees no reason why Costco would risk losing customers who participate in this tradition by “removing that cultural connection just to make an extra fifty cents.”

Another part of the collection’s appeal, says Loftus, is a semi-mythical tale involving its confrontation with price inflation, where it then goes–CEO Craig Jelinek went to his predecessor, Costco co-founder James Singal, to broach the topic of increasing the price of the hot dog combo.

According to legend, as well as Jellinek himself, there was no room for discussion.

“He said, ‘If you raise hot dogs, I’ll kill you,’” Jelinek recalled in a 2018 interview. 425 business.

This taunt appears regularly in viral social media posts, and Loftus says she’s seen it printed on T-shirts at Nathan’s Famous Hot Dog Eating Contest in Coney Island. Whether or not the hype surrounding the Costco dog is real or not, she says.

“It’s a good price, it tastes good, and it has a weird piece of folklore associated with it,” she adds.