In a world where prices seem to be constantly on the rise, there's one iconic deal that has remained unchanged for decades - the $1.50 hotdog combo at Costco.
Longtime CEO Craig Jelinek recently revealed how the retail giant has managed to maintain this low price point, even in the face of inflation.
Costco, known for its warehouse-style stores and bulk purchases, has been selling hotdogs at its locations since the 1980s. What started as a simple hotdog cart has now evolved into a full-fledged food court, but one thing has remained the same - the $1.50 hotdog combo.
Jelinek explained in a recent interview with Yahoo Finance that in-house production of hotdogs has been a key factor in keeping the price of the combo so low. "To keep it $1.50, we actually produce our own hotdogs," Jelinek said. "Do we make a lot of margin off of it? No. But we make it ourselves."
Costco's hotdog deal became so popular that the company opened its own hotdog factory in Tracy, California, in 2011. The factory produces regular-sized hotdogs that are sold in packs at its stores, as well as a larger hotdog sold at its food courts. In addition to the Tracy plant, Costco also makes hotdogs at a meat factory in Illinois, producing a staggering 300 million hotdogs each year, according to Costco CFO Richard Galanti.
Jelinek reiterated that Costco has no plans to raise the price of its famous combo, despite rising food prices and inflation concerns. "We are very happy with our $1.50 hotdog and we have no plans to change it," he said.
In November 2022, the price of groceries rose by 12% according to the latest Consumer Price Index, and the cost of hotdogs spiked by 13.4% compared to the same month the previous year. However, Costco executives have remained steadfast in their commitment to keeping the price of the hotdog combo unchanged.
During an earnings call in September, Galanti joked, "lightning just struck me," when asked about a potential price increase for the hotdog combo. He added that higher-margin parts of Costco's business, such as gas and travel sales, help offset the impact of the hotdog deal on the company's margins, allowing them to maintain the low price for the combo.
This commitment to keeping the $1.50 hotdog combo unchanged is not new for Costco. In fact, Jelinek shared an anecdote from 2018 when he approached Costco co-founder Jim Sinegal about a potential price hike for the hotdogs. "I said, 'Jim, we can't sell this hotdog for a buck fifty,'" Jelinek recalled. "'We are losing our rear ends.' And he said, 'If you raise the effing hotdog, I will kill you. Figure it out.' That's all I really needed."
The $1.50 hotdog combo has become a staple for Costco customers, who often see it as a symbol of the company's commitment to value and affordability. Despite inflation and rising food prices, Costco has held the line on the hotdog combo, remaining true to its commitment to provide quality products at competitive prices.
Comentários