This Is Why Costco’s Hot Dog Combos Really Cost $1.50

This Is Why Costco’s Hot Dog Combos Really Cost $1.50


Legions of Costco fans pony up their membership
fee each year to take advantage of the bulk retailer’s incredible deals on everything
from 128-ounce jars of mayonnaise, to magnum bottles of house brand champagne. But the true Costco fanatics know that a big
part of the wholesale club giant’s success comes a quarter pound at a time, and is served
at the Costco food court: The legendary hot dog and 20 ounce soda combo, which clocks
in at a wallet-pleasing $1.50. And it’s been that price since 1985, just
a year after the deal was introduced when Hebrew National set up a cart outside of a
Costco location in San Diego. So what drives ordinarily profit-hungry executives
to keep the price for the hot dog and soda combo so impossibly low? After all, Costco actually loses money on
every single combo sold, which adds up to around 135 million hot dogs per year. Tweaking prices, even a little, could dramatically
impact the company’s bottom line. But according 425Business, Costco co-founder
Jim Sinegal is so adamant about staying at $1.50 that he threatened to murder CEO Craig
Jelenik if the price was raised. Jelenik 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 all I really needed.” Okay, so it was just a joke. Still, death is a strong motivator! Jelenik also added, “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 [and soda].” Why such an impassioned commitment to hot
dog pricing? There are a few reasons. First, Costco is making a strategic choice
to lose a few pennies on every hot dog combo sold, because it draws people into the store
where they may be tempted to drop $1400 on an outdoor patio set, or $2500 on a riding
lawn mower. A single customer who comes for the hot dogs
but stays for the big screen television wipes out the loss on a few thousand hot dogs in
just one transaction. But there’s another reason to keep prices
low, and the food court humming with activity: A warm, family-friendly atmosphere creates
excitement, and all of that action in the food court can be enough to lure in even more
additional shoppers, as well as inspire existing customers to keep renewing their annual memberships. “Oh honey, I have an executive membership. I’ve got every membership ever offered by
Costco.” Keeping the hot dog and soda combo at such
a ridiculously low price hasn’t always been easy, and has required some changes to product
sourcing along the way. In 2013, Costco switched from serving Coca
Cola products to Pepsi products, partly in an effort to keep costs low and maintain the
hot dog combo’s $1.50 price point. But there was an even more dramatic change
even earlier, in 2009, when the company stopped serving Hebrew National brand all-beef kosher
hot dogs, and instead established their own manufacturing facilities to produce the hot
dogs in-house. Jelenik said that he was inspired by the threat
of mortal danger to come up with this drastic solution. “What we figured out we could do is build
our own hot dog-manufacturing plant (in Los Angeles) and make our own Kirkland Signature
hot dogs. Now we are doing so much hot dog business
that we’ve opened up another plant in Chicago.” Costco assistant vice president of publishing
David Fuller said that maintaining the $1.50 price tag also shows that the company isn’t
trying to soak their customers. “Holding a price that steady for that long
sends a clear message about what is possible when you decide to operate your business model
on a ‘cost plus’ basis instead of a ‘what the market will bear’ basis.” So while the hot dog combo may be a loss leader
in the ledger books, it seems as though it will continue turning a profit in the hearts
of Americans for a long time to come. And that may be the most delicious combo of
all. Check out one of our newest videos right here! Plus, even more Mashed videos about Costco
are coming soon. Subscribe to our YouTube channel and hit the
bell so you don’t miss a single one.

100 Comments

  1. Cost Plus Right ON!!!! What the market can BEAR….Capitalism out of control. Thumbs up to you Costco. Your showing the Greedy rich that they can still be rich without being Greedy!!!

  2. There is no loss on that deal. The soda cup cost more then the soda in it, they probably pay around 18 cents per hot dog and roll. The entire combo cost less than .50 cents. I understand you have other costs, utilities, employees, etc, but you have them whether you sell that combo or not. Could they charge more, sure, are they losing money, not even close.

  3. and big surprise maybe for many from the US when visiting Canada — guess what? The combo is $1.50 now (for a few years) in Loonies so visitors are getting a bigger bargain.

  4. No way are they losing money on a $1.50 hot dog combo…… NO WAY. Cosco can buy hot dogs for less than .30 cents a dog. Fountain soda is only pennies. It doesnt take a chef to make a hot dog, so labor is almost non-existent because they are there anyways.

  5. In Canada many moons ago (probably 10 years) the hot dog combo was $1.99. Then they lowered it to $1.50. I don’t know of any company who lowers their price so I eat there when I can!

  6. Wife and I always get an 8 oz frozen yogurt cup to split on the way home. It costs 1.35. It's the only thing we get at the food area.

  7. I came across an article a few years ago about Costco's food court and hot dog special. Costco sells more hot dogs each year than all of the Major League Baseball stadiums combined. Their pizza sales have been in the top 10 in sales for several years also.

  8. What I received was sloppy served wrapped in paper lined aluminum wrap. The condiments were on a different service island. Was it good?
    Yes, but I like a neater serving of a hot dog or any food item.

  9. Haha I don't even have a Costco membership or buy from their stores. I just go for the cheap food court goodies.

  10. I went to costco during my lunch break just to get a $1.50 hotdog soda combo the other day. shits bomb. put mustard, diced onions, and ketchup on that and thats agreat meal.

  11. If you think they're losing money on those hot dogs you are a fool. That's cheap shit that they don't even spend 70 cents on. This video was probably sponsored by Costco.

  12. Like the rotisserie chicken, it's bait to entice the customers to keep on shopping or to bring other people inside the warehouse and encite them to shop eventually.

  13. Finally a positive video. Most of your videos are so negative and mostly one sided. I only watch the success videos now.

  14. When I’m on a hella low budget, I go to Costco for $1.50 hot dog lunch all week. So please don’t get rid of it!!

  15. beef hot dogs $3 for 8 = 37cents
    potato buns $3 for 8 = 37 cents
    coke 24 cans for $7 = 29 cents
    total = $1.03
    you think costco is losing money on these lol?

  16. Those dogs are probably made from human meat. That's why they are cheap. Not even joking. They are evil just like all the other big corporations.

  17. Costco is a great place not only for members but also for employees. Compensation is GREAT and the benefits are even better. I was able to get a $15 chiropractic session if I wanted. For $20 a paycheck, you can get incredible medical coverage with Aetna, through Costco. Their 401k is great and they have resources you can utilize like financial advisors, counselors, and more. I lost my job there because life really got in the way. I had so much going on that I accrued absences. That's all. I loved working there and I love Costco. Also, as an employee, you get a free business membership in the first 90 days and after that, you get a free Executive Membership which more than pays for itself if you shop there a lot.

  18. THUS SAITH THE HOLY ONE OF ISRAEL. THE NEW TESTAMENT IS A STUMBLING BLOCK FOR THOSE THAT BELONG TO THE FATHER ALL MIGHTY WHICH YOU CLEARLY BELONG UNTO HIM. THAT IS WHY HE IS ADMONISHING YOU.

    IT IS NOT WISE TO PUT ON ANYONE'S ANOINTING OIL. WHETHER YOU THINK THEY ARE HOLY AND RIGHTEOUS OR NOT.

    THE ONLY REASON ANY PERSON SHOULD WEAR OIL IS NOT TO LOOK ASHY.

    THE FATHER ALL MIGHTY IS OUR ANOINTING OIL.

    THAT IS THE SAME AS PEOPLE THINKING THEY NEED TO COVER THEIR HEADS TO PRAY TO THE FATHER ALL MIGHTY. UNTRUE. YOUR HEAD SHALL BE COVERED SO THAT PEOPLE DO NOT LUST AFTER YOUR HAIR, MEN AND WOMEN ALIKE.

    YOU MUST STOP LISTENING TO RELIGION, WHICH IS EVERY WORD IN THE BIBLE, AND START LISTENING TO WHAT THE FATHER SAYS.

    OF COURSE THERE IS PLENTY OF TRUTH IN THE BIBLE AND OTHER RELIGIOUS BOOKS… BUT YOU MUST LISTEN TO HIS SPIRIT TELLING YOU WHAT IS TRUTH AND WHAT IS NOT.

    REMEMBER THE SCRIPTURE THAT SAYS THE SCRIBES PEN IS FAULTY? WHO ARE THE SCRIBES? WRITERS? WHO WROTE THE BIBLE? SCRIBES? WHO ARE THE SCRIBES? MEN. SO IN TRUTH, THE MAN'S PEN IS FAULTY.

    WHO IS MAN THAT HAS BREATH IN HIS NOSTRILS? DO NOT LISTEN TO MAN. LISTEN TO THE HOLY SPIRIT.
    THUS SAITH THE HOLY ONE OF ISRAEL.

  19. BRING THEM INTO YOUR HOUSE, AND SERVE THEM YOUR FOOD. AND MAKE THEM SERVE YOUR GOD… JESUS OR WHATEVER IDOL THEY BELIEVE IN.

  20. 1:54 this dude really eating pizza with a fork lmao. i mean, at least do that shit in some fine dining location instead in a high school cafeteria style eating area with $2 pizza slices. If it actually was a high school cafeteria, this dude would get his ass bullied off

  21. To be fair the last time I actually ordered a $1.50 combo hot dog at Costco, I learned that they severely shrunk the size of said hot dog, even worse is they dont have the fillings like onions and sauerkraut anymore, you have to specifically ask them for it and even then u get the smallest sized plastic container of it. Never have I been so disappointed in it that I've never ordered this combo in about 2 years now. Man the Costco's in Canada suck.

  22. What about the Costo's that Deleted the Hot Dog from their menu? The one in San Leandro, California doesn't have the Hot Dpg any more

  23. I remember me and the boys always going for the Costco food court after school because it was outside so you didn’t need no membership

  24. I’ve seen the Costco hotdog packages for sale, but I haven’t seen the buns. Can you tell me which buns they use? Thank you.

  25. I don't have any costcos for like 200 miles, but thankfully Sam's Club is competing with them, offering a hot dog + drink combo at the same $1.50 price point (Sam's opts for 1/4-pound Nathan's franks, iirc)

  26. lol they arent olosing money, i could buy store bought retail items and sell for that much and make profit. fake a nd gay 3 min costco ad

  27. Every time I go to Costco I think "AMERICA!!!" The hot dog is about as American as u can get so I agree with the founder on the pricing strategy. Next if they offer coffee for 5cents they'll destroy Starbucks.

  28. 1:52 All this food looks so unhealthy. And that woman looks like she's had enough already. I hope she finds a way to lose weight. The food culture in USA is actually unbelievable. How can you slowly kill yourself, are people so weak that they need that little dopamine kick they get when eating "good" food?

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