July 19, 2022

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130 Million Hot Dogs Defy Inflation

Costco is eating the higher costs of its popular $1.50 hot dog and soda combo so customers don’t have to.

The warehouse retailer has never raised the price on its hot dog combo, a fixture in the store’s food courts since 1985. Even with the U.S. inflation rate at a more than four-decade high, Costco has no plans to adjust hot dog combo prices in the future either. 

“That $1.50 price point has been sacrosanct from the very beginning,” said richard Galanti, chief financial officer at Costco. 

He said the company sells about 130 million hot dogs annually at its food courts within its 833 warehouses. “It’s become somewhat of a signature item for us,” he said. 

Mr. Galanti declined to say whether the company intends to raise membership fees, which start at $60 a year. He noted that the company typically increases membership fees about every five years. The company last raised its fees in 2017.

The hot dog combo, however, is off limits. 

If the price of the hot dog combo kept up with the rate of inflation, it would cost about $4.13 today, according to the Bureau of Labor Statistics.

Costco originally sold kosher beef hot dogs when the hot dog combo made its debut in the 1980s, Mr. Galanti said. The company was selling so many hot dogs that it decided to build its own hot dog factory in central California to increase its supply and lower costs. Costco opened the plant in Tracy, Calif., in 2011 and switched to making a non-kosher beef hot dog, he said.

Now Costco’s 250,000-square-foot hot dog plant in Tracy makes two items—a large hot dog that gets sold at Costco’s food courts and regular-sized hot dogs that the warehouse club sells in packs, Mr. Galanti said.  

Costco added hot dog capacity at a meat plant in Morris, Ill., in 2018, Mr. Galanti said. The meat plants in Illinois and California are now churning out about 300 million #hotdogs a year, Mr. Galanti said.

Even Costco’s co-founder has had strong feelings about the frankfurter. 

At a 2018 luncheon, Costco Wholesale Chief Executive W. Craig Jelinek recounted how he once told the company’s co-founder Jim Sinegal they needed to raise the price of hot dogs. “I said, ‘Jim, we can’t sell this hot dog for a buck fifty,’” Mr. Jelinek said. “‘We are losing our rear ends.’ And he said, ‘If you raise the effing hot dog, I will kill you. Figure it out.’ That’s all I really needed.” 

The Wall Street Journal Joseph De Avila
#inflation #retailing #LossLeader #StoreTraffic #grocery

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