The Costco Hotdog Edition

Colin here. On the recommendation of WITI contributor Reilly Brennan, I recently dug into the Acquired episode about Costco. The entire podcast is consistently impressive, but this episode delves into the alchemy behind building such an iconic and beloved brand. At first glance, a large, cavernous warehouse with overhead lighting might not seem like something that should evoke passion. However, diverse offerings, ranging from beloved Kirkland Signature t-shirts and vodka to, most iconically, the $1.50 hot dog, foster loyalty.

Why is this interesting?

The price of the hot dog has remained a constant $1.50 since 1985. That gets you both the hot dog and a Pepsi, at a comically low price.

According to Food & Wine:

Last week during Costco's quarterly earnings call, the company's chief financial officer, Richard Galanti, began by informing analysts that the net income for the quarter was $1.868 billion or $4.20 per diluted share, with net sales rising by 15.2%. Yet, the figure average consumers were eagerly waiting for was only mentioned at the end of the call: $1.50 — the price of the famed Costco hot dog and soda deal. That's when Galanti revealed something unexpected: Costco aims to maintain this deal's price "forever."

The fact that Costco has held their hot dog food court deal at the same $1.50 price since 1985 is legendary. Costco President and CEO W. Craig Jelinek once mentioned that co-founder Jim Sinegal threatened him over a potential price hike. This recent call might be the first instance a Costco executive has publicly stated an intent to maintain that price indefinitely.

In an era where inflation has pushed many consumer product prices upwards, Costco stands as a reassuring constant. However, they've had to take measures to manage costs. This includes producing their own Kirkland Signature hot dogs instead of partnering with external suppliers over the years. They've gone to significant lengths to uphold this price, especially considering they sell over 100 million dollars' worth of hot dogs annually.

According to Mental Floss, who penned the definitive article on the topic:

"...they [Costco] continue to show surprising adeptness at avoiding any factors that might add even a penny to the deal. When California introduced a soft drink tax that would have increased the cost to consumers, Costco outlets in the state switched the combo to include Diet Pepsi, since diet beverages were exempt from the tax. The company's "effing hot dog" seems set to remain a bargain for the foreseeable future."

It's not just about the food itself; it's a significant signal of customer-centricity. It also shows an understanding of the brand's playful and iconic touchpoints and the importance of defending them. (CJN)

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Thanks for reading,

Noah (NRB) & Colin (CJN)

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