How Much A Costco Hot Dog Combo Would Cost If It Kept Pace With Inflation

It is hard to find something you don't pay more for these days compared to what lower prices were even just a few years ago. Some products, like bananas, seem to be inflation-resistant, but most other foods from the grocery store have experienced a hike in the costs of producing and transporting them, leading to higher price tags and people shelling out more money in the checkout line. However, Costco's famous food court hot dog still only sets folks back $1.50. Yes, that is the same price it debuted at way back in 1985. 

Were this iconic staple of the membership warehouse food court to adjust its price in response to inflation, it would cost $4.56 today. Costco sells a wild amount of hot dogs every year, to the tune of over 100 million annually. One can do the math for themselves as to how much money the big box store is missing out on every year by keeping the price of hot dogs so low. However, folks aren't likely to see the rate go up anytime soon. Selling cheap dogs is a pivotal part of Costco's business model known as a loss leader strategy. Because hot dogs can bring in customers via the low price, even the corporate executives who might stand to benefit from a higher price are passionate about keeping the cost low for Costco's loyal customers.

Costco may technically lose money selling millions of hot dog combos every year, but it makes up for that lost revenue in other ways. Other menu items in the food court have seen prices rise over the years, making up some of the forfeited income from the inflation-resistant franks. Yet, the cheap hot dogs are more often considered to serve as a loss leader meant to get customers in the door. After all, Costco's business model centers on people purchasing memberships to enter and shop at a location, which is where the majority of the big-box store's profit comes from. 

Still, the low cost of a simple meal at Costco hasn't always been safe. When former CEO Craig Jelinek approached then-CEO Jim Sinegal with concerns that the low price of the hot dogs was putting them in financial hot water, he suggested raising the rate. Sinegal wasn't hearing it, bluntly telling Jelinek, "If you raise the effing hot dog, I will kill you. Figure it out" (via 425 Business). All told, the weenies and their low price represent more than just an affordable snack; they are now an integral part of the business's identity. The company eventually opted to switch from using Hebrew National franks to using hot dogs made at a company-owned plant to reduce costs. Although Costco still loses money selling customers all-beef hot dogs every year, it is considered worth it to retain Costco's reputation as a place where folks can get a quick bite to eat before hunting for bargains.