Shoppers at Costco know they can rely on good bargains throughout the store. But pricing in the current era is noticeably erratic; a recent report noted that consumer prices had jumped 9.1 percent in just one month (June 2022), the biggest jump since 1981. So even if Costco still promises good value and low prices, some items are going to cost more, because procuring them is more expensive than it was before, and the club retailer needs to pass some of those costs on to consumers.

But shoppers can be reassured about one price that will remain the same: the $1.50 hot dog and soda combination. That price has never changed, from the moment the offering was introduce in the mid-1980s. Costco also repeatedly promises customers that it never will. It’s a beacon of consistency that signals the company’s dedication to ensuring customers can afford to feed their families. Even if the cost to the firm far exceeds the price, it plans to continue using it to draw in loyal shoppers.

Highlighting this consistency is key for Costco, which announced its plans to raise some other prices in its food courts. The price for a soda jumped 10 cents; its chicken bake rose by $1. Beyond its quick service food offerings, and similar to every other grocery retailer today, it has increased the prices for dairy and beef products on its shelves.

But notably, its rotisserie chicken remains priced the same, at $4.99. The ability to keep hot dog and rotisserie chicken prices the same largely stems from its supply chain design; Costco owns both poultry and hot dog manufacturing facilities.

Overall then, shoppers at Costco might see a slight increase in their grocery bills, but that increase likely is relatively smaller than would be the case at other stores. By committing to keeping its prices radically low—in some cases, even lower than its costs—Costco gives shoppers the comforting reassurance and signal that its priorities have not changed, even if a few of its prices have.

Discussion Questions: 

1. Are there any conditions in which Costco should raise the prices of its hot dogs? If so, what are they?
2. How does owning some manufacturing facilities help Costco maintain consistent prices? Should it expand its manufacturing capabilities?

Source: Tom Ryan, “Should Costco Raise its Food Court Prices?” Retail Wire, July 11, 2022; Jeanna Smialek, “Consumer Prices Jumped Sharply Again in June,” The New York Times, July 13, 2022