Posted on 06/02/2024 3:23:12 AM PDT by RandFan
(NEXSTAR) – Gary Millerchip, the new CFO and executive vice president of Costco, shared a frank message with investors and analysts while hosting his very first Costco earnings call on Thursday afternoon.
“To clear up some recent media speculation, I also want to confirm the $1.50 hot dog price is safe,” said Millerchip, shortly after welcoming attendees to the company’s Q3 earnings call.
The price of Costco’s hot-dog-and-soda combo, at $1.50, has remained unchanged since the item was added to menus in the mid-1980s. But recent comments from Richard Galanti, Costco’s former CFO, left some consumers feeling uncertain about the item’s future.
...
The story behind Costco’s popular hot dog — and its unchanging price — can be traced back to Costco co-founder James Sinegal, according to former Costco CEO Craig Jelinek.
“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 recalled in a 2018 interview with 425 Business. “And he said, ‘If you raise the effing hot dog, I will kill you. Figure it out.’”
(Excerpt) Read more at thehill.com ...
Notice how we are seeing all these stories right after Her Majesty the Couch Cushion Queen said that Joey told all these places to lower some prices so people will vote for him?
No problem. Just use lower grade lips and a******s for the hot dog.
“I have to admit that Costco’s buck-fifty hot dog-and-Pepsi deal is a guilty pleasure. It’s a damned tasty frankfurter. And, yeah, it’s obviously a loss-leader for them, but every damned person who takes advantage of the deal is also there at Costco to buy other stuff... in many cases, a lot of stuff they didn’t even know they wanted. And that’s the whole idea”
Actually no, that is only a true statement as of the last few months. No membership was needed for the food Court until this year. And the last two times I have been there since implementing the new policy the Food Court had no lines more than three people. That has never been the case before. Maybe not enough data points being only the last two visits, but it appears the new policy could be keeping down the traffic. At least at the Cjino Hills CA Costco.
Whether they actually take a loss on it probably depends on accounting tricks. The actual bun, sausage, drink and condiments probably don’t cost that much. Prep and cook time also can probably be absorbed. Start allocating in a share of the store overhead costs, transport, share of the kitchen costs, it probably is a loss, but not a big one. Until recently, McDonalds could make money on a dollar hamburger and a dollar large drink. They probably still could. Drinks are almost pure profit-the most expensive element is the paper cup.
Pepsi would give their product away to keep the competition’s name out of it.
We got an Instapot and an air fryer last year. (The slow cooker had gotten broken, so the Instapot was a replacement for that, in addition to planned use for its other functions.)
Instapot gets used once a month or so at most. Air fryer (less than $50 on sale at JCPenny) gets used almost daily, sometimes multiple times a day. If we had a convection oven, it would get a lot less use, so factor that in if applicable.
Substitute a large mealworm for the dog.
There's a very similar story about the "under priced" Disney land coffee table books, Walt pointed out to the bean counter that selling the book for a quarter of its cost was a money maker.
They go home, put it on their coffee table, show it to their neighbors and gush about how wonderful their trip their was.
You cannot buy better advertising!
Sheetz has had 2 for a buck for awhile now.
Kraut relish and onions free.
Ah yes, the hyphen, "to indicate a missing or implied element." In this case, this one ain't too bad, and the other one sucks.!! :)
Talk about shrinkflation.
“Air fryer (less than $50 on sale at JCPenny) gets used almost daily, sometimes multiple times a day. If we had a convection oven, it would get a lot less use, so factor that in if applicable.”
I have them.
-Pressure cooker for roasts ~45 mins. The pressure really helps infuse the marinade and seasoning.
-Air fryer for most everything.
-Convection oven for pizza, cake and lasagna.
-Toaster for bagels and toast
The hot dog isn’t a loss leader. They make money off of it, there is just no margin.
We always get a hot dog and soda then shop. 😉
The main reason I’ve never had a Costco dog is that the line was always too long. Haven’t been to Costco since last year, so I don’t know if that’s still the case.
I walked out of there with a $700 dollar receipt the other day! Wow! bidungnomics!
costco has indeed cracked down on stores ignoring the requirement to show a membership card at the snack stand ... WAY too many freeloaders were showing up and elbowing out card-carrying members ...
sam’s apparently still allows non-members access to their snack stand ... the other day at lunchtime practically an entire high school poured through the doors without cards to inundate their snack stand at our local Sam’s Club ...
Many of the people eating in Costco have children with them. People with a lot of children buy in bulk.
It’s their gasoline prices that I find amazing - fifty cents a gallon cheaper. If you use their credit card it’s even cheaper than that.
It costs $60 per year for a Costco membership. $120 per year if you have an “executive” membership.
I remember several decades ago talking to a Kmart executive shortly after Walmart had eclipsed Kmart as the largest retailer. He mentioned a decision the beancounters had made to eliminate the in store lunch counters because they were losing money.
Apparently during the day non-working female shoppers were meeting at the lunch counters for lunch. These in-store restaurants were losing money. After K-mart eliminate the lunch counters as a cost savings, store traffic and sales dropped. The bean counters, only looking at the losses didn’t understand they were social centers that attracting shoppers to congregate, socialize, and most importantly spend money in the store.
Likewise Kmart eliminated its signature “blue light special” which featured heavily discounted products. This in-store promotional program created excitement and sales in the store. Again the bean counters could see only the lose on the featured item, not the full price merchandise begin checked out with the blue light special.
James Sinegal, the founder of Costco, was a visionary who understood the mindset of Costco customers. The CFO, sitting in his/her office staring at a spreadsheet on a PC knows little about the psychology of the customer roaming the store. Sinegal understood the hot dog brought customers to the store who spend hundreds of dollars on other very profitable items each time they visit a Costco store and savor the $1.50 hot dog.
Many of America’s once great retailers have disappeared over the past 50 years (Sears, Kmart, Woolworth) after narrow minded beancounters and private equity owners put cost cutting over the customer experience.
Long live the $1.50 hot dog. The day the price increases to $2.00, $2.50 or whatever, you will know Costco has started down the slippery cost reduction slope to extinction.
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