Costco hot dogs have cost $1.50 since the 1980s. Here’s why prices aren’t changing

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

The retailer has been hawking its hot-dog-and-soda combo for a smooth $1.50 since it first hit menus in the mid-1980s.

The price tag has held steady 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 a dollar fifty, which is actually very loyal to the history of what the hot dog is: a low-price food for the masses that is, ideally, good," explains Jamie Loftus, author of Raw Dog: The Naked Truth About Hot Dogs.

Speculation that the cost of the famed combo might be changing began to heat up in March after Richard Galanti, the company's then-chief financial officer, told Bloomberg that it's "probably safe for a while" — not necessarily the guarantee that every hungry Costco member wanted to hear.

His successor, Gary Millerchip, cleared things up in his first quarterly earnings call on Thursday.

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

That sound bite has since made the rounds on social media, providing welcome relief to the chain’s many hot dog devotees.

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

"It's like a PR slam dunk for them, as has this story always been," Loftus told NPR. "It's like that, 'No, we're not going to change the price. We've got your back.'"

How Costco keeps its hot dog prices steady

Costco did have to raise the cost of certain food court staples — its chicken bake and 20-ounce sodas — in 2022, at the recent peak of food price inflation.

Its treasured $4.99 rotisserie chicken remained immune, however.

That and the hot dog are what experts have called an example of loss-leader pricing — a strategy in which companies sell certain products below their market cost in order to get customers in the door and, ideally, putting even more profitable goods in their carts.

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

Executives offered similar explanations on last week's earnings call.

Millerchip said that inflation in the third quarter, which ended in May, was “essentially flat” in fresh foods and that the “slight” inflation in food and sundries was “offset by some deflation in nonfoods,” led by the lower freight costs of hardware, sporting goods and furniture.

The chain was even able to reduce prices of 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 over email that Costco is essentially “‘buying’ customers’ loyalty for whatever price they are unwilling to charge above $1.50.”

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

“The retailer is ultimately eating that cost to keep the customer loyal (no pun intended),” he added.

The lore of the hot dog combo, explained

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

The tale of the Costco dog dates back to around 1984, when Hebrew National — Costco's original hot dog supplier — sold hot dogs from a cart outside one of its stores in San Diego. (The company began operating its own hot dog factories in 2008, to cut down on supply chain costs.)

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

Witcher says that this part of the experience has basically enabled Costco to establish its own form of consumer culture.

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

He doesn’t see a reason why Costco would risk losing customers who partake in that tradition by “removing that cultural connection simply to make an extra fifty cents.”

Loftus says another part of the combo's appeal is an almost-mythical anecdote involving its brush with price inflation, in which then-CEO Craig Jelinek went to his predecessor, Costco co-founder James Sinegal, to broach the topic of increasing the hot dog combo price.

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

"He said, 'If you raise the effing hot dog, I will kill you,'" Jelinek recalled in a 2018 interview with 425 Business.

The quip resurfaces regularly in viral social media posts, and Loftus says she has even seen it printed on T-shirts at Nathan’s Famous Hot Dog Eating Contest at Coney Island. For better or for worse, she says, the hype around the Costco dog is real.

"It's a good price, it tastes good, and it has this weird piece of folklore attached to it," she adds.

Copyright 2024 NPR