Costco’s signature $1.50 hot dog has always been a popular staple with shoppers at any of Costco’s 602 warehouses across the U.S., but how exactly has the big-box store grown since its introduction in 1985? How has the price of all-beef dishes been kept so low?
The reason was initially emotional.
Costco’s late Chairman Jeffrey Brotman, who co-founded a warehouse empire with CEO Jim Sinegal after his retirement, wrote his first business at the now-defunct King County Journal in Bellevue, Wash., in the early 2000s. said it was a hot dog operation. The Daytona Beach News Journal reported that he and his brother rode in a cart at Seattle Center in the late 1970s.
After Mr. Brotman teamed up with Mr. Sinegal to found Costco in 1983, the two vowed never to raise the price of the hot dog and soda combo.
Costco should charge at least $4.25 for a combo meal, the financial magazine Motley Fool wrote in an article published last year, as inflation drove up costs in subsequent decades.
But in a 2018 interview with Seattle-based publication 425 Business, then-CEO Craig Jelinek said that when he was told the hot dog prices weren’t sustainable, , recounted Sinegal’s famous reaction since he retired.
“Once we came (to Sinegal), we said, ‘Jim, we can’t sell this hot dog for $50.’ We’re losing our rear end,” Jelinek said. “And he said, ‘If you feed me a hot dog, I’ll kill you.’ Understand that.
How Jelinek solved the problem by building Costco’s own hot dog manufacturing plant in Los Angeles, followed by another in Chicago, avoiding the use of more expensive third-party suppliers. I told you what I did.
Now that the factory is up and running, Jelinek told the outlet that the marquee product is generating “enough revenue to make a fair profit.”
In a July 2022 interview on CNBC’s “Squack on the Streets,” Jelinek was asked again if the price of hot dogs would change.
Jelinek simply answered, “No.”
Other executives at the warehouse giant gave similar responses at shareholder meetings about their intentions for hot dog and soda combo prices.
In 2022, Costco’s then-CFO Richard Galanti told investors there was no danger of the $1.50 price disappearing anytime soon in response to a question about margin pressure due to low costs. MarketWatch reported at the time.
“We don’t really think about it that way,” Galanti said. “Some companies that are doing well with margins can help them be more aggressive in other areas. Or, as you mentioned, make their hot dogs and sodas a little more expensive. It can last for a long time, forever.”
With Jelinek retiring last year and Galanti stepping down last month, some are wondering if combo meal prices are in jeopardy. But Costco doesn’t seem to be breaking its co-founder’s promise any time soon.
Last month, an Ohio resident made headlines after eating nothing but Costco’s $1.50 hot dog and soda combo for a week. He explained to Fox Business that he took on this challenge because the cost of food has increased over the past few years, and he spent a total of about $45 on food.
