Frank stuff: Costco's $1.50 hot dog deal might be unmatched in all of retail

[Costco Wholesale in Folsom California]

Costco Wholesale (COST [https://seekingalpha.com/symbol/COST]) announced this week that it is now offering customers the option to order a 16.9-ounce Kirkland bottled water instead of a 20-ounce soda with its iconic $1.50 hot dog combo. While the menu change is rather minor, it is noteworthy because it is the only revision to the $1.50 hot dog deal in more than 40 years. Social media reaction to the change has been positive, with many Costco (COST [https://seekingalpha.com/symbol/COST]) customers noting that they do not drink soda.

Due to inflation, the $1.50 hot dog cuts into Costco's (NASDAQ:COST [https://seekingalpha.com/symbol/COST]) profits on a nominal basis but is widely considered an overall driver of store traffic and membership loyalty. "The hotdog became a psychological anchor, a reminder to customers that Costco is built on trust, fairness, and value that feels untouchable. Even though the company loses close to $300M annually on the deal, it wins far more in membership renewals, loyalty, and priceless brand equity," highlighted Shopper AI brand strategist Alon Barak.

The history of the $1.50 hot dog at Costco (COSTCO) tracks to the introduction at the food court in 1984, shortly after the company’s 1983 founding. In a short time, the hot dog and soda combo quickly became a defining feature of the Costco (COST [https://seekingalpha.com/symbol/COST]) shopping experience. As membership and food courts expanded, Costco (COST [https://seekingalpha.com/symbol/COST]) transitioned to manufacturing its own Kirkland-branded hot dogs. The company also opened facilities in California and Illinois to reduce supply chain costs and preserve the low price.

Costco (COST [https://seekingalpha.com/symbol/COST]) management has long been vocal about the significance of this offering. Within the last year, CFO Gary Millerchip and CEO Ron Vachris have publicly declared their commitment to maintaining the $1.50 price.

Is there a similar pricing sensation in all of retail? The closest parallel might be AriZona Iced Tea's $0.99 price point for a can of iced tea that has been held steady since 1992. The $0.99 is printed on the can and generated strong brand loyalty, although the family-owned company does not control how individual stores sell the product, so the price can vary.

For its part, Walmart's (WMT [https://seekingalpha.com/symbol/WMT]) Sam's Club has countered the Costco (COST [https://seekingalpha.com/symbol/COST]) hot dog deal with a price of $1.38 and a larger 20-ounce soda size. One key difference is that generally anyone can walk into a Sam's Club food court, while Costco (COST [https://seekingalpha.com/symbol/COST]) checks for membership status.

If you can think of a better deal in all of retail, add it to the comment stream.

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