Large corporations are seemingly always naming new CEOs, and most of the time, the public hardly bats an eye at these announcements. Unless it’s a big player like Disney, Twitter, or McDonald’s, it’s not really something that the average person feels compelled to read about. But the announcement that Costco’s CEO will be stepping down early next year has all of America’s average people asking one question: What will become of the $1.50 hot dog combo?
The Costco food court’s $1.50 hot dog combo, explained
Let’s step back for a moment and connect the dots. Even if you don’t pay for a Costco membership and/or refuse to mooch off a friend’s membership, you’ve probably heard of the excellent deal in the Costco food court: For the low price of $1.50, customers can purchase a 1/4-lb. Kirkland Signature hot dog and a 20-oz. refillable soda. You can even dress up the dog with some complimentary onions.
As writer Trung Phan points out, the combo was introduced at this price in 1985, and if you adjusted the hot dog for inflation it would cost somewhere around $4.20 today (nice). Why keep it so cheap?
The Costco food court is located right by the entrance and exit to the store, so members (and only members) have the option to start their shopping trip with a meal. Presenting such an affordable option instills goodwill in shoppers and creates the impression that every other price they encounter on their Costco journey will be similarly low. This bit of retail psychology must be demonstrably profitable for the brand, because Costco leadership has long done everything in its power to keep the combo priced at $1.50, market forces be damned.
In a Twitter thread, Phan details the various ways Costco has managed to hang on to its $1.50 combo over the decades; since 2009, it has even been producing its own hot dogs, rather than maintain contracts with brands like Hebrew National. The company is also always wheeling and dealing to get the lowest supplier prices on everything from condiments to buns, and as hot dog expert Jamie Loftus points out, this push for lower prices isn’t necessarily a good thing. “Lower cost —> worse worker conditions in meat plants for workers,” she wrote on Twitter.
Nevertheless, much like 99-cent cans of AriZona Iced Tea, the Costco hot dog combo has endured—under the threat of death itself. Current Costco CEO W. Craig Jelinek once told a story about how Costco founder and previous CEO Jim Sinegal pushed Jelinek to keep the combo priced at $1.50, despite Jelinek’s concerns that it was losing the company money. “If you raise the effing hot dog, I will kill you,” Sinegal allegedly said. “Figure it out.”
Even as other food court items have risen in price and expensive new items have been introduced, the hot dog combo stays at $1.50. It’s a brand builder, and it’s something everyone knows about Costco.
Costco’s new CEO
This presents the question: Once Jelinek steps down, will his replacement have the same dedication to keeping Costco dogs cheap?
Ron Vachris, president and COO since February 2022, will step into the CEO role on January 1, 2024. According to Costco’s announcement, “This is the culmination of the long-standing succession plan that Craig has discussed with the Board.”
“I have total confidence in Ron and feel that we are fortunate as a Company to have an executive of his caliber to succeed me,” Jelinek said in a statement.
Indeed, Vachris hasn’t just worked in the C-suite. According to the announcement, he has worked for Costco for more than 40 years, “starting as a forklift driver, and subsequently serving in every major role related to Costco’s business operations and merchandising activities.” Since Vachris has seen every nook and cranny of the business, he doesn’t sound like someone who’s going to come in and look for elements of the business to dismantle or otherwise disrupt. This transition of power appears at the outset to be a carefully coordinated one, which means fans of the hot dog can rest easy.
Surely the CEO of a Fortune 500 company understands the unmatched value that this legendary 38-year hot dog discount brings to a business. Over the course of its lifespan, the deal has endeared Costco to its millions of fans, and helped build a brand reputation that other companies would kill for—although luckily, Costco hasn’t had to. Yet.