Here’s Why Costco’s Hot Dog Is Still Just $1.50

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Costco’s hot dog food court deal is almost too good to be true. Read on to see why it’s so cheap. [[{“value”:”

Inflation is usually the sort of thing that gradually creeps up on people. For example, you might see the cost of your favorite cereal rise from $4.59 a box one year to $4.67 the next year and $4.75 the year after that.

But since mid-2021, living costs have been rising exponentially, and at such a rapid pace that it’s been extremely noticeable to consumers. In fact, a lot of people are having trouble sticking to their budgets and avoiding debt given how rapidly prices have been climbing.

However, one cost that hasn’t gone up in recent years — or recent decades — is Costco’s hot dog and soda combo. The price of that food court special is a mere $1.50, and it’s been that way since 1985, when the deal was first introduced.

At first, that might seem like a lost revenue opportunity on Costco’s part. But there’s a specific reason why Costco has not raised the price of its hot dog and soda combo, and why it may keep the current price in place for many more years.

It’s all about retaining and attracting customers

If Costco were to adjust the price of its hot dog and soda meal for inflation, it would cost $4.50 today — not $1.50. Costco is well aware of this. But the reason Costco is willing to stick to that $1.50 price point is that its hot dog deal is effectively a marketing tool, not an intended money-maker.

During its last fiscal quarter, Costco made $1.11 billion in membership fee revenue. That’s $84 million more than a year earlier.

Clearly, it makes financial sense for Costco to do what it can to grow its membership base and retain current customers. And a good way to do that is to offer an attractive deal like the $1.50 hot dog and soda combo that’s just too good to pass up.

In fact, it used to be that non-Costco members could access the store’s food court at any time for a quick meal. Now, Costco is changing that practice and limiting food court access to members only. So those who want to continue enjoying their $1.50 hot dog have to pay for a membership, whether it’s a basic one costing $60 a year or an Executive membership for $120.

Should you become a Costco member?

It probably doesn’t make sense to become a Costco member for the $1.50 hot dog alone. But it could make sense to join Costco for the general savings you can enjoy on everything from groceries to household products to apparel.

The really nice thing about Costco is that it stands behind not just its products, but memberships, too. So if you buy a membership you don’t end up liking or using, you can cancel and get a refund.

Because of this, it could pay to join Costco, spend a few months shopping there, and see how much money you’re actually saving. If it’s more than the cost of your membership, you’ll know that keeping it is a no-brainer.

Costco’s goal, like all retailers, is to make money. And its hot dog deal is not a driver of revenue. But it also doesn’t need to be.

As long as Costco can keep collecting membership fees, it can continue to offer the ultra-low prices it’s known for and enjoy a world of success. So think of the $1.50 hot dog and soda deal as a means of Costco saying thank you to customers for all of their business.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool recommends Maker. The Motley Fool has a disclosure policy.

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