Forever seems reasonable to us

Last week, Costco had its quarterly earnings call, and while there was much to discuss regarding the organization’s success, it was the topic of a certain frank that caught everyone’s attention. The company’s chief financial officer, Richard Galanti, made it known that the company’s beloved hot dog/soda combo will remain $1.50—forever (and that’s a mighty long time).

That’s right, folks. Costco’s frankfurter—washed down with a beverage of your choice and eaten in a fast-paced fury at the food court—will never be touched by inflation. The $1.50 price has remained the same since 1985 and is basically legacy at this point. Costco President and CEO W. Craig Jelinek said that co-founder Jim Sinegal once threatened some serious harm if the price was ever increased beyond that amount.

“I came to [Sinegal] once, and I said, ‘Jim, we can’t sell this hot dog for a buck fifty. We are losing our rear ends,’” Jelinek was quoted as saying. “He said, ‘If you raise the effing hot dog, I will kill you. Figure it out.’”

If adjusted for inflation, MarketWatch calculated, this combo that has saved many a toddler meltdown would now sell for $4.11. Truist Securities’ Scot Ciccarelli inquired on the call about the deal, saying in part: “Costco tends to put a line in the sand on pricing with some items”—including the$1.50 deal—”despite today’s inflationary pressures,” and wondered out loud if Costco had other categories they are “using to maybe harvest some extra margin.”

“We really don’t look at it that way.” Galanti responded. “I think the thing I mentioned earlier about there are some businesses that are doing well with margin… 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.” With 583 locations in 48 states, that’s a lot of cheap dogs.

If you don’t have a Costco membership and wonder if it’s worth it, given the plans to provide the cheapest lunch on the planet for all of eternity, you will have to factor in the yearly membership fee of $60. Even if you tack that onto the $1.50, it still seems like a pretty good deal to us.

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