Costco CFO Richard Galanti pledged last week to keep the hot dog-and-soda combo price steady.
Costco’s $1.50 hot dog and drink combo has long been regarded as a great value by customers, having launched at that price in 1985. As a result, given the inflationary pressures, customers have been concerned that the corporation may hike the price of this classic combination. Fortunately, during a presentation on fourth-quarter financial results last week, Costco CFO Richard Galanti put these worries to rest by committing to keeping the hot-dog-and-soda combo pricing the same. During the call, he was reportedly asked if the retailer would consider raising the price of its all-beef frank to offset margin squeezes in other areas.
“We really don’t look at it that way,” Galanti said, reports MarketWatch. “I think the thing I mentioned earlier about there [being] some businesses that are doing well with margin, like [the] gas business, [in] a smaller way — in the travel business, those things help us be more aggressive in other areas, or, as you mentioned, hold the price on the hot dog and the soda a little longer — forever. But at the end of the day, no, I don’t think we necessarily look to find places where we can harvest margin.”
Costco Wholesale’s $1.50 hot-dog-and-soda combo is in no jeopardy of disappearing anytime soon.https://t.co/owiTaySPfb
— MarketWatch (@MarketWatch) September 24, 2022
Costco management has previously expressed dissatisfaction with the pricing of its famed hot dog combo. Customers would be looking at a charge of $4.11 if the pricing were increased to account for inflation. After noting how much money the shop was losing on the special, CEO Craig Jelinek famously suggested raising the price to co-founder Jim Sinegal. Sinegal, on the other hand, promptly knocked down the suggestion by threatening to murder Jelinek if he ever raised the price of the combo.”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.,'” Jelinek said in an interview with 425 Business in 2018. “And he said, ‘If you raise the effing hot dog, I will kill you. Figure it out.’ That’s all I really needed.”
“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. 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,” he added.
“We have never been a firm that prioritizes stockholders. You do have a responsibility to a shareholder—you do—but if you prioritize the shareholder, you will be in it for the short term. We had some issues with Wall Street because of the wages we paid (and) our refund policy, but we’ve moved on because we’ve been able to develop the firm “Jelinek elaborated. “Everything we do at Costco is based on determining how little we can make while still paying our obligations because we want to sell more. We want to keep lowering the price and selling more units. It provides us with extra gross margin cash to cover our bills.”