Why Costco hasn’t changed the price of their “hot dog and drink” deal since 1984

One of the best deals you’ll find at Costco is their food court’s quarter-pound hot dog and refillable 20-ounce drink, which sells for a mere $1.50. The price has remained unchanged since 1984, when they first sold them as a trial run for their food service, and counter to what you’d expect for something that sells at the same price for decades, both the hot dog and the drink are larger than the original.

One of the reasons why they’ve never increased the price of the dog is a directive from Costco co-founder and former CEO Jim Sinegal. When discussing the subject with current CEO Craig Jelinek, who said they were losing money on each sale of the dog-and-drink combo, he replied:

“If you raise [the price of] the effing hot dog, I will kill you. Figure it out.”

Compared to the money that Costco makes, the money they lose on the hot dog combo is a rounding error, and with the goodwill that buys, they might as well consider it a marketing expense with a nice rate of return. Even so, they’ve still taken some measures to reduce their costs without reducing quality by switching away from their original hot dog supplier, Hebrew National, and making their own, and by cutting a deal with Pepsi for the drinks.

People are (rightfully) suspicious of free stuff.

You might wonder why Costco simply doesn’t make the hot dog and drink combo free instead of charging a ridiculously low fee for it, especially since it’s a members-only store. My feeling is that if the combo was free, it would quickly become an abused privilege. The $1.50 barrier, low as it is, prevents Costco shoppers from going overboard, and may even give the combo an air of legitimacy that it might not have if it was free.

Although the hot dog deal’s been around for almost 35 years, there’s been a recent spate of interest in it, as evidenced by these articles:

• The Enduring Enigma of Costco’s $1.50 Hot Dog and Soda Combo (MentalFloss.com, June 8, 2018)
• Costco loses money every time it sells a $1.50 hot dog and doesn’t care (The Takeout, April 11, 2018)
• Why Costco food courts have charged $1.50 for hot dogs since 1985, according to employees (Business Insider, April 10, 2018)
• The real reason a Costco hot dog costs only $1.50 (Business Insider, April 4, 2018)
• The Story Behind Costco’s $1.50 Hot Dog Deal (Kitchn.com, February 27, 2018)