Some things never change – traffic is always boring; The rent is always too high; A sporting event in Philadelphia will never be cold. And Costco will always offer its combo signature of Dog and Hot-Dog drink for $ 1.50, the same price that it has been for almost four decades, it does not matter which runs the retailer or what else it sells.
The legendary Wiener, as well as the roasted chicken of $ 5 of Costco, are “fundamental” of the success of the warehouse chain, said Richard Galanti, who resigned last year as a financial director, said Fortune Phil Wahba in a deep dive in the superb success of the warehouse club.
Previously, Galanti said THE Wall Street Journal The price of $ 1.50 was “sacrosanct” and told investors that the price of dogs would remain fixed “forever”.
Galanti’s successor as a financial director, Gary Millerchip, reiterated this commitment. “I also want to confirm that the $ 1.50 hot dog price is sure,” said Millerchip CnnAccording to an X post.
In fact, Costco will revise its entire hot supply chain before it increases the price of the dog. When Costco introduced the $ 1.50 combo in 1985, he obtained his Hebrew National Oxef Dogs. But in 2009, the costs had increased so much that the warehouse club brought internal production. He built a plant outside Los Angeles to produce Kirkland hot dogs (not kosher), then widened production to add a second plant in the Chicago region.
This is the same case with the SODA part of the combo: when Costco’s contract with Coca-Cola was renewed a decade ago, the retailer went rather to Pepsi to save prices (although he now returns to COKE products). To avoid the San Francisco tax on sugary drinks, Costco has chosen to serve only diet sodas or unsweetened tea in its catering areas.
This commitment to a backward price of rock extends to the founder of the work club, Jim Sinegal.
As Craig Jelinek, Sinegal’s successor and CEO explained, Craig Jelinek in 2018, he suggested to Sinegal the price of dogs who lost money should be raised.
“I came to [Sinegal] Once and I said, “Jim, we cannot sell this hot dog for a fifty male. We lose our rear ends ”, remembers Jelinek during a commercial event near Seattle.
Response from Sinegal: “If you raise the Hot-Dog Effing, I will kill you. Decline it, ”continued Jelinek.
“That’s all I really needed,” he said. Bringing an internal production, he added, finally allowed the store to make a profit on the popular menu item even at a price of $ 1.50. Today, Costco sells nearly 200 million hot dogs per year of its catering courts, FortuneWahba reported.
The importance of low prices
But why is it so essential to keep the price frozen at $ 1.50 – which online user nicknamed “the most stable goods on earth”? After all, Costco has increased many other prices in its stores and periodically adjusts its increases in increasing.
As Galanti explained it to FortuneThe price is there to send a message. A chicken of $ 5 and a dog of $ 1.50 “signal that Costco holds the line at low prices”.
This is the same message as that sent by television and Costco’s reduced prices, strategically stored by the entry of the members, as said the new CEO Ron Vachris Fortune. “You come to say:” Wait, can I recover my $ 60 subscription with a single article? ” He said.
This strategic strengthening of Costco’s reputation helps to generate huge loyalty among its 120 million members and brings them back, said the retail consultant, Kathy Gersch Fortune. “People say to themselves:” Costco has done research for me, and they know it’s the best, “she notes.
This is one of the reasons why more than 90% of Costco members renew their members each year. And whatever the quantity of goods that Costco sells or what it costs, it is this membership that really pays the bills.
“The most important article we sell is the membership card,” said Vachris Fortune. “Everything we do supports this transaction.”
As Wahba reports, annual membership fees of $ 60 (or $ 120 for additional advantages) represented two -thirds of Costco’s profit in a given year, and in recent years, the retailer would have displayed a net loss if it was not for membership fees.
The emblematic status of hot dog means that its price is now Costco Lore. And the more time the price, the more difficult it will be to raise it.
“This is the mentality,” said former CEO Jelinek. “When you think of Costco, you think of $ 1.50 hot dogs.”
A version of this story originally published on Fortune.com June 1, 2024.
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