How Costco Keeps $1.50 Hot Dog and Soda Combo Despite Inflation

Longtime Costco CEO Craig Jelinek recently revealed how the big-box retailer is managing to maintain its $1.50 price point For the hot dog and soda combo despite the increase in inflation last year.

Jelinek, Costco’s top boss since 2012, said domestic production of hot dogs has helped the company cut costs. Costco has been selling hot dogs in its stores since the 1980s — the original hot dog cart evolved into a full-fledged food court.

“We evolved and brought in a food court, but we still had $1.50 hot dogs.” Jelinek told Yahoo Finance in a Dec. 5 interview Published last Friday. “To keep it $1.50, we actually make our own hot dogs.”

“Do we make a lot of profit from it? No,” Jelinek admits. “But we do it ourselves.”

Costco’s hot dog deal became so popular that the company opened its own hot dog factory in Tracy, California in 2011. The factory sells regular-sized hot dogs in packs and a large hot dog in its stores. In its food courts.

In addition to the plant in Tracy, Costco makes hot dogs at a meat plant in Illinois. Both facilities make about 300 million hot dogs each year, Costco CFO Richard Galanti said told the Wall Street Journal in July.

Jelinek reiterated that Costco has no plans to raise the price of its famous combo.

“We’re very happy with our $1.50 hot dog and we have no plans to change it,” he said.

Even as overall inflation eased, food prices continued to hammer U.S. shoppers in November. According to the latest Consumer Price Index, grocery prices rose 12% last month.

Hot dog prices rose 13.4% in November.

Costco executives have been adamant for months that the hot dog and soda combo won’t see a price increase in the coming days.

When asked about a possible increase during an earnings call in September, he joked, “Lightning struck me.” Higher-margin parts of Costco’s business, such as gas and travel sales, helped offset the hit from the hot dog deal, he said.

“Those things help us be more aggressive in other areas, or as you mentioned, to keep the price of hot dogs and soda down a little longer — forever,” Galanti said.

Jelinek shared a story about the time in 2018 when he approached Costco co-founder Jim Sinegal about a possible price increase for the company’s hot dogs.

“I said, ‘Jim, you can’t sell this hot dog for a buck fifty,'” Jelinek said. “‘We’re losing our rear ends.’ And, ‘If you grow an effing hot dog, I’ll kill you. Find it.’ That’s what I really needed.”