Why hasn’t the price of Costco’s $1.50 hot dog and soda combo increased in 38 years?

The $1.50 hot dog and soda combo at Costco has remained at the same price for an extended period due to a deliberate business strategy known as a ‘loss leader.’

According to Investopedia, a loss leader is a “strategy involv[ing] selling a product or service at a price that is not profitable but is sold to attract new customers or to sell additional products and services to those customers.”

The idea behind a loss leader is that while the specific item may not generate a profit on its own, it serves as a strategic tool to bring in customers who are likely to make additional purchases.

In the case of Costco, the $1.50 hot dog and soda combo acts as a loss leader to drive foot traffic into their warehouses. Costco is known for its membership-based business model, where customers pay an annual fee for the privilege of shopping at the store. By offering a highly affordable and popular food item like the hot dog and soda combo, Costco can draw in a large number of customers who may be enticed by the low prices and value before then buying other items in store.

Costco’s strategy is to make up for the loss on the hot dog combo through the overall increase in sales volume across everything else it sells. Indeed, the company’s revenue grew by 6.76% last year after two prior years of more than 15% growth. Clearly, the company is doing something right.