Costco's $1.50 Hot Dog Should Actually Cost Way More, an Economist Says
If you could travel through time back to 1985, you could save a pretty penny on your grocery bills. Back then, bananas cost 33 cents per pound, a dozen eggs cost just 80 cents, and a half-gallon of milk cost only $1.09, according to the U.S. Bureau of Labor Statistics, which has been tracking consumer prices for over a century now.
All of these basic kitchen staples are priced a heckuva lot higher in 2023—eggs, most conspicuously, are over five times more, about $4.21 on average.
But one food item noticeably hasn't budged a single cent, even after all this time. Despite decades of inflation and sweeping socio-economic change, this popular nosh has remained stubbornly unchanged since the Reagan Administration, like some price-fixed fossil.
I'm referring, of course, to Costco's legendarily low-priced hot dog combo, still standing firm at $1.50 after some 38 years and counting.
That's ridiculously cheap in today's dollars, even for a hot dog. In fact, if the Costco hot dog were virtually any other food item in America, it would cost almost three times as much.
That's according to a recent analysis by Ecoinometrics, which mathematically adjusted the price of the famous frankfurter, based on several different inflationary metrics, including the most common measurement: the federal government's Consumer Price Index (CPI). The analysis also considered other indices, such as CPI sub-categories more specifically focused on food, as opposed to consumer goods overall.
Based on four different formulas, the analysis found that the Costco hot dog realistically should cost between 142% and 227% more, specifically, $3.63 to $4.91. Based purely on the CPI, the club's sausage and soda combo would cost $4.28.
Of course, the Costco hot dog isn't just any ordinary food item, subject to the usual whims of the market. No, it's special—the fixed price is symbolic of the warehouse club's professed commitment to value, which is why the company works so hard to keep the cost so low.
When current Costco CEO Craig Jelinek once proposed raising the price, a company co-founder reportedly told him, "If you raise the [price of the] effing hot dog, I will kill you. Figure it out."
Instead, to keep costs down, the warehouse club decided to drop its normal hot dog supplier and make the sausages itself, opening a factory in California in 2011 and another in Chicago in 2018.
The inflation-defying hot dog continues to drive sales for the members-only club. Costco reported selling 157 million of the combos last year.