Should Costco raise its food court prices?
Costco last week earned widespread media coverage for raising prices on two popular items on its food court menu, the chicken bake and 20 oz. soda.
As first reported by Business Insider, Costco increased the price on its chicken bake, a cheese-crusted bread loaf stuffed with chicken, bacon and Caesar dressing, to $3.99 from $2.99. Prices on the 20 oz. soda went to 69 cents from 59 cents.
The moves gained attention because Costco rarely raises prices at its food courts.
“I was surprised, ’cause they never do increases on the items,” Georgina Gomez, a long-time foodservice worker at a Costco in Los Angeles, told the Los Angeles Times.
Other more popular items remained unchanged amid concerns about increases prompted by severe inflationary pressures.
On Costco’s third-quarter analyst call on May 26, Bob Nelson, SVP, finance and investor relations, went out of his way to dispel rumors that the club might increase the price of its famed $1.50 hot dog and soda combo. Mr. Nelson said, “The price, when we introduced the hot dog-soda combo in the mid-’80s, was $1.50. The price today is $1.50, and we have no plans to increase the price at this time.”
In an interview with The Seattle Times in 2009, Costco’s co-founder Jim Sinegal jokingly threatened to “kill” current CEO Craig Jelinek if the combo price was changed. Mr. Sinegal said, “We’re known for that hot dog. That’s something you don’t mess with.”
Other best sellers remaining the same included the whole cheese pizza, $9.95, and twisted churro, $1.49.
At the grocery level, Costco has held prices firm on its rotisserie chickens, at $4.99, the same price as when they were introduced in 2009. Costco owns poultry and hot dog manufacturing facilities to keep prices low.
Costco has raised prices on dairy, beef, croissants, water bottles and other items this year, but appears to be absorbing much of the soaring input costs.
In a report from early June, Numerator said club stores have maintained the “most stable grocery prices in 2022,” with inflation rates between 6.9 percent and 8.2 percent year over year. Industrywide, grocery prices in May surged a record 14.6 percent year over year.
- Costco just raised prices of two food court favorites – Business Insider
- Inflation hits the Costco food court: Chicken bake price up $1, soft drinks up 10 cents – Los Angeles Times
- Costco Wholesale (COST) Q3 2022 Earnings Call Transcript – The Motley Fool
- Complete Q&A with Costco founder, CEO Jim Sinegal – Seattle Times
- Sign of the Times: Once Unthinkable, Costco Raises Prices on Popular Food Court Items – NBC Los Angeles
- Costco just upped the prices of two-food court favorites – Today
- Grocery Inflation in May Reaches Record High of 14.6%, Numerator – Numerator Reports
DISCUSSION QUESTIONS: Is holding prices on most food court items more important for Costco than on grocery prices? How might Costco’s price perception in an inflationary environment need to differ from big box and supermarket competitors?