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Costco says it will keep its $1.50 hot dog combos. Here’s how: NPR

Customers line up at a Costco food court, advertising a hot dog and soda special for $1.50.

Customers wait in line at a Costco food court in Hawthorne, California.

Patrick T. Fallon/AFP via Getty Images

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Patrick T. Fallon/AFP via Getty Images

Fear not, hot dog fans: Costco doesn’t plan to raise the price of its beloved franks any time soon.

The retailer has been selling its hot dog and soda combo for as little as $1.50 since it launched on menus in the mid-1980s.

The price has remained stable over the years despite inflation – otherwise it would be closer to $4.40 these days.

“People like it because it’s delicious and it costs fifty dollars, which is actually very true to the history of the hot dog: a low-cost food for the general public and which is, ideally, good,” says author Jamie Loftus. of Raw Dog: The Naked Truth About Hot Dogs.

Speculation that the cost of the famous combo could change began to intensify in March after Richard Galanti, then the company’s chief financial officer, told Bloomberg that it was “probably safe for a while” – this which isn’t necessarily the guarantee every hungry Costco member wanted to hear.

His successor, Gary Millerchip, clarified things Thursday during his first quarterly earnings conference call.

“To dispel some recent media speculation, I also want to confirm that the $1.50 hot dog price is safe,” Millerchip said.

This soundbite has since made the rounds on social media, bringing welcome relief to the chain’s many hot dog enthusiasts.

Loftus says, “It’s a good PR move for Costco to not change that price,” adding that it has a humanizing effect on the company.

“It’s like a PR slam dunk for them, as this story always has been,” Loftus told NPR. “It’s like this: ‘No, we’re not going to change the price. We support you.'”

How Costco keeps its hot dog prices stable

Costco had to raise the price of some food court staples — its chicken meals and 20-ounce sodas — in 2022 amid the recent spike in food price inflation.

His precious $4.99 roast chicken, however, remained safe.

That and the hot dog are what experts have called an example of loss-making pricing — a strategy in which companies sell certain products below their market price in order to attract customers and, ideally, put products even more profitable in their baskets. .

Galanti had said in previous earnings calls that revenue from other areas of Costco helped keep food court prices low, according to The Hill..

Executives offered similar explanations during last week’s earnings call..

Millerchip said third-quarter inflation was “essentially stable” in fresh food and that “mild” inflation in food and miscellaneous items was “offset by some deflation in non-food”, led by lower transportation costs for hardware, sporting goods and furniture. .

The chain was even able to reduce prices on some items, including its Kirkland Signature frozen shrimp and pine nuts (from $29.99 to $24.99).

When it comes to hot dogs, Brendan Witcher, vice president and principal analyst at Forrester Research, told NPR via email that Costco “‘buys’ customer loyalty, no matter how expensive they are.” not willing to charge above $1.50.

It’s not an unusual practice in retail, he said, pointing to the practice of stores offering customers 5% off online orders simply by signing up with their email address.

“Ultimately, the retailer bears this cost to retain the customer (no pun intended),” he added.

The History of the Hot Dog Combo, Explained

The company said earlier this year that it sold nearly 200 million hot dog and soda combos in fiscal 2023 alone.

The low cost of Costco’s quarter-pound dogs — as well as the chain’s oft-discussed commitment to keeping it that way — has earned them a cult following over the decades, spawning memes and fan-created merchandise .

The history of the Costco dog dates back to around 1984, when Hebrew National — Costco’s first hot dog supplier — sold hot dogs from a cart in front of one of its stores in San Diego. (The company began operating its own hot dog factories in 2008, to reduce supply chain costs.)

Thus began the evolution of the Costco food court, where shoppers can also find foods like pizza slices and chocolate chip cookies.

Witcher says this part of the experiment essentially allowed Costco to establish its own form of consumer culture.

“No one buys that hot dog and soda and puts it in their grocery bags to eat tomorrow,” he said. “The quick-service restaurant is part of the adventure culture that Costco has created, much like you would buy food and drink at a movie theater, amusement park or concert.”

He doesn’t see why Costco would risk losing customers who participate in this tradition by “removing that cultural connection just to make fifty cents more.”

Loftus says another part of the combo’s appeal lies in an almost mythical anecdote involving its brush with price inflation, in which thenCEO Craig Jelinek visited his predecessor, Costco co-founder James Sinegal, to broach the subject of raising the price of hot dog combos.

According to legend, as well as according to Jelinek himself, there was no room for discussion.

“He said, ‘If you lift that damn hot dog, I’ll kill you,'” Jelinek recalled in a 2018 interview with 425 Business.

The joke regularly resurfaces in viral social media posts, and Loftus says she’s even seen it printed on T-shirts during Nathan’s famous hot dog eating contest in Coney Island. For better or worse, she says, the hype around the Costco dog is real.

“It’s a good price, it tastes good and there’s this weird piece of folklore attached to it,” she adds.

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News Source : www.npr.org

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