Costco’s Hot Dog Remains at $1.50 Despite Prices Spiking Elsewhere

Over the last few years, inflation has caused prices to creep up and impact pretty much everything. However, Costco is still keeping the price of its hot dog-soda deal where it is.

Costco’s iconic hot dog combo, sold at its food courts for $1.50, has remained the same price since 1985. Despite economic downturns like the Great Recession, the housing crisis, the pandemic, and the recent rapid rise in inflation, this price has not budged.

According to the Bureau of Labor Statistics, since the COVID-19 pandemic began, consumers have seen prices spike by 20%. The areas impacted the most by price rises are housing and groceries.

If Costco increased the price of its hot dog deal in line with inflation, it would be about $4.50, three times its current cost. However, the wholesale giant’s $1.50 deal is a deliberate business strategy known as a loss leader. What this means is despite inflationary pressures, Costco is willing to accept losses on hot dog sales to attract and retain customers.

Scott Mushkin, a retail analyst at R5 Capital said, “It’s branding.” He explained that the $1.50 deal creates customer loyalty, adding, “It reminds customers of who Costco is.”

Costco sells over 100 million hot dogs each year, with a loss for the company. To offset these losses, Costco has increased the prices of other products, such as pizzas and other food court offerings.

What really helps the retailer maintain low prices is its special and distinct business model, where the majority of its revenue comes from memberships. Meanwhile, items sold in its warehouses are usually priced at or near cost — and occasionally even below.

Speaking about the $1.50 price of the hot dog deal in a recent interview, Richard Galanti, Costco’s long-standing finance chief who retired this month, said it was “probably safe for a while.”

The company’s famous hot dog deal started in its early days, and it has “defied inflation” from that point on. To maintain the price of the hot dog, Costco came up with ways to cut other costs at the food court, like transitioning from 12-ounce soda cans to cheaper 20-ounce fountain drinks.

In 2009, Jim Sinegal, Costco’s co-founder, said, “I know it sounds crazy making a big deal about a hot dog, but we spend a lot of time on it.” He added, “We’re known for that hot dog. That’s something you don’t mess with.”

Across the globe, Costco sold over 130 million hot dog deals last year worth around $195 million.