Myke Bates

The Costco hot dog combo is a legendary meme. But how does it still only cost $1.50? Introduced in 1985, the price of that combo should be ~$4.20 if adjusted for inflation. Thankfully, the $216B warehouse retailer has done everything in its power to keep the price down. And Costco sells A LOT of them: 130m+ hot dogs a year (more than all MLB teams combined). Many believe the $1.50 combo is a “loss-leader” for Costco, but this is incorrect. In a 2009 interview, Costco co-founder and former CEO Jim Sinegal told the Seattle Times that Costco doesn’t “engage in loss leaders” and “the only time we sell below cost is when we’ve made a mistake and have to mark it down”. However, the retailer does cap its margin at 14% and drives many products to near break-even. Here’s how Costco has managed to keep the cost of the inconic hot dog combo at $1.50: 1️⃣It dropped leading hot dog suppliers like Hebrew National and Nathan’s because they wouldn’t lower prices 2️⃣In 2009, Costco built its own hot dog manufacturing plant in LA (and has a second one in Chicago) 3️⃣ It got better pricing on buns, ketchup and mustard 4️⃣ It removed onions and sauerkrauts as free condiments 5️⃣ It dropped Polish sausages 6️⃣ The pop that came with the combo was swapped from a can to refillable fountain soda Costco’s effort to keep hot dog prices low is also the source material for the greatest quote in business history. In 2018, the current Costco CEO Craig Jelinek was recounting a conversation he had with Sinegal, who he just replaced as CEO. Jelinek told Sinegal he wanted to raise the price of the $1.50 hot dog and pop combo. Sinegal shot back, “If you raise the [price of the] f**ing hot dog, I will kill you. Figure it out.” Costco has figured it out and, in September 2022, the company’s CFO Richard Galanti confirmed that the hot dog combo would remain at $1.50 despite rising inflation. “There are some businesses that are doing well with margin like gas business on a smaller way -- in the travel business,” said Galanti. “Those things help us be more aggressive in other areas, or as you mentioned, hold the price on the hot dog and the soda a little longer, forever.” Forever sounds about right.