As someone who’s been shopping at Costco for 20 years and counting, I’m well aware that the store’s legendary food court has long been a huge draw for members. And if there’s one food court deal that tends to get a lot of attention, it’s the $1.50 hot dog and soda combo.
Costco introduced its iconic $1.50 hot dog meal deal in 1985. And now, more than 40 years later, that $1.50 price point hasn’t budged.
Of course, through the years, there’s been much speculation about Costco increasing the cost of the hot dog combo, the same way the company has a tendency to raise membership fees every seven years or so.
But Costco’s executive team has stood firm on not increasing the cost of the hot dog and soda and combo.
As former Costco CFO Richard Galanti told Fortune in 2024, the company sells 199 million food-court hot dogs a year. And the hot dog deal is, in a word, “foundational,” signaling that Costco is committed to the low prices it’s known for.
Costco’s hot dog meal plays a key role in the company’s success
For decades, Costco’s $1.50 hot dog and soda combo has been more than a cheap meal — it’s a cornerstone of the company’s brand and business model.
When people think about Costco, they associate the company with low prices. And holding the price of the hot dog combo steady has helped Costco carve out that reputation.
As Brendan Witcher, vice president and principal analyst at Forrester Research, said, Costco is “buying customers’ loyalty for whatever price they are unwilling to charge above $1.50.”
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And Neil Saunders, managing director of GlobalData Retail, was quoted as calling the hot dog combo “a symbol of what Costco stands for.”
The hot dog deal is so important to Costco’s success that the company has repeatedly made a point to reassure investors that the price point isn’t moving.
During Costco’s Q3 2024 earnings call, then-newly appointed CFO Gary Millerchip told investors, “To clear up some recent media speculation, I also want to confirm the $1.50 hotdog price is safe.”
IKEA’s latest food court creation poses threat to Costco hot dog deal
Just as Costco’s food court is a nice fringe benefit for members to enjoy, so too does IKEA’s in-store cafe serve a similar purpose. Fans of the furniture giant’s cafe are often quick to tout its famous Swedish meatballs, as well as a host of signature dishes that are known for their low prices and high quality.
Whereas Costco’s food court is known for primarily serving food that can only be described as less than healthy, IKEA’s cafes serve a range of dishes that could actually count as wholesome meals. These include salmon, chicken tenders, and fresh salads.
But while IKEA’s cafe menus mostly focus on Scandinavian comfort food, some locations in the United Arab Emirates are now selling a giant 20-inch hot dog for about $5, Delish reported. And despite the much higher price point, the new hot dog offering is unsurprisingly drawing comparisons to Costco’s famous hot dog.
Now the good news for Costco is that IKEA’s giant hot dog seems to be exclusive to the UAE, with no word on a U.S. release. But given the success of Costco’s hot dog meal, it won’t be surprising to see IKEA add it to its U.S. cafe menus in the near future.
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Of course, IKEA and Costco have two very different business models, so it’s unlikely that IKEA would manage to take much business away from the warehouse club giant, even if its hot dog meal becomes a huge hit in the U.S.
The danger, rather, is that if IKEA’s higher-cost hot dog proves popular, it could sway Costco’s executive team to perhaps rethink that inflation-proof $1.50 price point.
Even though that $1.50 deal is a huge marketing tool for Costco, the company loses money on it year after year. Seeing IKEA’s success at a higher price point could drive to Costco to make a pricing change at long last.
Maurie Backman owns shares of Costco.
Related: Costco solves problem that plagues Walmart and Target
