The CEO of Costco has revealed a critical moment that ensured a well-known deal at the company remained unchanged.
If you’ve ever visited Costco, you’re probably aware of the popular offer to get a hotdog and a soda for $1.50.
Introduced at Costco food courts in 1985, this deal has become a cornerstone of the business.
It was a good bargain when first introduced, but what makes it remarkable is that 40 years later, the price is still the same.
The hot dog is a quarter pounder, or 110 grams, accompanied by a 20oz soda, or 590ml.
Not bad for $1.50!
The deal has garnered a cult following, with some people even making t-shirts to celebrate it.
If adjusted for inflation, the deal would cost around $4.40 today, but Costco has made significant efforts to maintain the original price.
Costco President and CEO Craig Jelinek recounted that the price was of paramount importance to founder Jim Sinegal.
At a presentation in 2018 reported by 425 Business, he said: “I came to [Jim Sinegal] once and I said, ‘Jim, we can’t sell this hot dog for a buck fifty. 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 pretty clear!
Jelinek added: “That’s all I really needed. By the way, if you raised [the price] to $1.75, it would not be that big of a deal. People would still buy [it]. But it’s the mindset that when you think of Costco, you think of the $1.50 hot dog.”
Understanding the importance of strong branding and the association with the deal, Costco has taken extraordinary measures to keep the price of its hotdogs down.
This led the company to build and run their own hot dog plant, allowing them to produce the wieners at cost rather than paying a markup to a contractor.
Jelinek stated: “By having the discipline to say, ‘You are not going to be able to raise your price. You have to figure it out,’ we took it over and started manufacturing our hot dogs. We keep it at $1.50 and make enough money to get a fair return.”
And this wasn’t the only time that Sinegal mentioned death in relation to the combo’s price, except the other time it was his own potential demise rather than someone else’s.
In 2009, he was asked by the Seattle Times what it would mean if the price of the hot dog combo ever went up.
Sinegal replied simply: “That I’m dead.”