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The Enduring Enigma of Costco's $1.50 Hot Dog and Soda Combo
- megaman22 8y agoCumberland Farms doesn't cost much different. Hotdogs are about the cheapest possible meat, and fountain soda costs nothing, effectively. My dark secret is that I absolutely love gas station hot dogs. Especially at old country stores that have a steamer loaded with red hotdogs on one side and the buns on the other.
- aviv 8y agoThe last thing they want to do is make it more expensive for their members to feed themselves sickness and disease. Costco reaps the benefits of having unhealthy members in their Pharmacy department among others, including over consumption of other food items, especially prepared factory foods and lower quality animal products.
- neogodless 8y agoYour cynicism is misplaced. CostCo may be a large money-making company, but they really seem to be "one of the good guys." They take care of their employees and are a well-liked consumer brand.
- aviv 8y agoTaking care of employees has nothing to do with what I said. Tobacco companies also take care of their people. Panda Express and Five Guys are also well-liked by the customers who get sick consuming their products.
- ceejayoz 8y agoThe real problem with what you said is probably the visit frequency of your average Costco customer. It's not likely to be the place you go often enough to get unhealthy off the hot dogs - the whole point is stocking up on items in bulk. A hotdog a month isn't going to make you need blood pressure or cholesterol meds.
- aviv 8y agoThat is a huge misconception. Many people use Costco as a frequent take out food place. Pizza and hotdogs. In my kids class alone I know of several parents who often pass by Costco on the way from school to feed kids dinner there. It's done far more often than you think.
- chillwaves 8y agoIf CostCo didn't exist do you think their eating habits would improve?
- onetimemanytime 8y ago>>Panda Express and Five Guys are also well-liked by the customers who get sick consuming their products. Free will. You may become e vegan, but I want to eat meat products and drink beer. I will bear any consequences, if any, just like that person that doesn't exercise.
- aviv 8y agoI agree. Adults have free will. I cringe though every time I see an adult feed their kids such nasty disease forming foods. Borderline child abuse.
- wtfreally 8y agoHow is Panda Express a "disease-forming food" Is all Chinese food "disease forming", in your downvoted opinion?
- spraak 8y ago> in your downvoted opinion? I think this is going against the rules or etiquette of HN
- SirYandi 8y agoI have to agree with you that feeding children excessive (or even moderate) amounts of unhealthy food is essentially cruel and abusive. Either the adult doesn't know better, or is just taking the easy option. It really upsets me to see overweight children. Giving them a whole swathe of mental and physical health issues before they've even gotten started with life.
- wtfreally 8y agoHow do you get sick eating Panda Express? You can get veggies and noodles in addition to meat there...
- pasquinelli 8y agofood is scary and dangerous and it'll make you sick in subtle, imperceptible ways that'll eventually kill you. i just don't even bother with the stuff anymore tbh.
- emodendroket 8y agoI haven't been to one in quite a while but my impression is that there is lots of added sugar in all the sauces they use, in addition to a lot of fried food.
- deleted 8y ago[deleted]
- veebat 8y agoMany of the sauces are sweet, and the recipes tend to incorporate every major food allergen you can think of. I still visit regularly because you can opt out one portion at a time: You can go half-and-half veggies and chow mein, broccoli beef, mushroom chicken and have something a bit plain, but far more balanced than most fast food. And while the service model is extremely scripted and doesn't accommodate larger orders gracefully, my average time from getting in line to finished service is faster than Mcdonald's and more consistent since the order is put together right in front of you.
- CryoLogic 8y agoCostco has the highest employee satisfaction according to Glassdoor of any major US retailer. From what I've been able to find they have really good benefits and pay as well. I personally have bought a bit of Costco stock just because I like supporting businesses that treat their employees well. Everyone I know who worked at or works at Costco can attest to that.
- VectorLock 8y agoI think your lack of cynicism is misguided. CostCo doesn't "care" about anything but its bottom line, like any other corporation.
- gowld 8y agoIndividuals also don't care anything but their bottom line, so this whole line of reasoning is void of meaning.
- emodendroket 8y agoThat's just not true.
- pwinnski 8y agoIt's not true for companies either.
- emodendroket 8y agoAccording to the currently most widely accepted theory of business, public companies have no responsibility to anyone other than their shareholders. In practice this means the bottom line trumps all other considerations.
- philwelch 8y agoSo you think Costco's master plan is to sell people hot dogs and soda at or below cost, just ordinary hot dogs, and as a result of eating one hot dog and drinking one soda when they do their monthly Costco trip, they will develop chronic illness and need to pick up prescription drugs there? Even if you're that much of a sociopath, there are much better business models.
- aviv 8y agoYes. The messaging from Costco is that it's OK to eat this way. It feeds the overall mentality of unhealthy members that this lifestyle goes inline with their over consumption of oversized foods at Costco generally. That there is nothing wrong with grabbing a hotdog, pizza, and soda on your way to pick up your blood pressure "medication" at the pharmacy once you're done stuffing yourself with the food causing your high blood pressure.
- biastoact 8y agoIt is not unlike Prime Video and Prime Music (among others). When you run a membership program you create offers that increase the perceived value of the membership and engagement with your ecosystem. Similar is Costco gas, people wouldn’t drive out of their way for the discount if they didn’t already pay the membership. And while you are there you might as well pick up four times the bread you need, more milk than you consume in a week, a new camera (that was probably cheaper online), and a hot dog on your way out. Getting the value out of that $100 membership leads people to consume far more than they normally would.
- thecosas 8y agoA few things you can do at Costco without a membership: * Eat at the food court * Buy alcohol (in certain states, see below) * Get an eye exam * Get your hearing checked * Fill prescriptions at the pharmacy States where you can buy alcohol w/o a membership: * Arizona * California * Connecticut * Delaware * Hawaii * Indiana * Massachusetts * Michigan * Minnesota * New York * Texas * Vermont P.S. Looking for a better source, but here's a general list: https://thekrazycouponlady.com/tips/money/6-things-you-can-do-at-costco-without-a-membership https://thekrazycouponlady.com/tips/money/6-things-you-can-d...
- 1701d 8y agoExcept you don't have to be a member to eat at Costco.
- 8y ago
- kodablah 8y ago> When California recently enacted a soft drink tax that would have raised the consumer's cost, Costco locations in the state switched the combo to include Diet Pepsi. What are they going to switch to when the state enacts a hot dog tax? Or a fat tax? Or a preservative tax? Or a disposable cup tax?
- bvc35 8y agoWhile we're at it, let's add a sugar tax, high-fructose corn syrup tax, fried food tax, GMO-food tax, extra car taxes,poor-taste book tax, and a bad-movie-tax. Hopefully this will force people to do what I damn-well know they should be doing, and make them run their lives better than they could themselves.
- dragonwriter 8y ago> When California recently enacted a soft drink tax that would have raised the consumer's cost, Costco locations in the state switched the combo to include Diet Pepsi. The link supporting this claim refers to changes in San Francisco and Seattle locations as a result of city ordinances, not a statewide change in California.
- gowld 8y agoHow is that possible, for Costco or for any restaurant that has a self-serve soda fountain?
- KSS42 8y agoIn those cities, Costco only offers diet drinks. They removed the sugary drinks from the fountain.
- gowld 8y agoAha. The article links to paywall-dodging cache link for a news item with more detail. https://www.bizjournals.com/seattle/news/2018/05/03/costco-removes-regular-soda-sugar-tax-diet-only.html https://www.bizjournals.com/seattle/news/2018/05/03/costco-r...
- maerF0x0 8y agoWhy dont they just remove the sugar from the syrup and offer packets or liquid syrup in containers like at coffee shops?
- adventured 8y agoBecause they'll just chase you around with laws regardless. That attempt to avoid the law through cleverness would generate news and sensationalism. That would spur a government response, because if there's anything politicians hate, it's attempts to circumvent their power. You're better off working within the system and trying to negotiate them down or into a different regulatory framework, than waving a flag at the bulls.
- fpgaminer 8y agoTechnical Aside: Just by scrolling through the article mentalfloss.com flooded my history, making it impossible to use the back button. "Neat"
- reaperducer 8y agoIt also disables reader mode in Safari.
- pooya13 8y agoIt's also interesting how they design the warehouses to place the unnecessary items in the front (where you are excited to shop) and the essentials at the back (where you might be more hesitant to pick up anything). They also sometimes reduce prices on memorable items to induce the sense of affordability for the whole store.
- fencepost 8y agoWhile the article starts with a "we're losing money on these" anecdote, the article does not say that they're losing money in terms of selling the combo below cost. They are selling it for less than the market will bear, but that also applies to the rotisserie chickens ($5/3lb vs grocery stores at 2lb). If it makes you feel better, think of the lost $0.50-$2 as being silently charged to their marketing budget behind the scenes with the money never actually flowing through Costco. Edit: if you look into the economics of rotisserie chickens, I believe you'll find that Costco is actually making a nice profit on them despite the relative low cost vs competitors.
- achille 8y ago> but that also applies to the rotisserie chickens ($5/3lb vs grocery stores at 2lb). It's a common myth that rotisserie chickens are cheaper than frozen. If you do the math you'll find that rotisserie chickens are slightly more expensive. See: https://www.ams.usda.gov/mnreports/pywretailchicken.pdf https://www.ams.usda.gov/mnreports/pywretailchicken.pdf > Rotisserie, Under 2lb, Norwest cost is $5.73/lb on average
- Avshalom 8y agoI think they meant that costco sells a 3lb rotisserie at 5 dollars while most stores sell a 2lb at $5. Which mean Costco's Rotisserie is 50% or 67% (depending which way you want to calculate it) cheaper.
- ams6110 8y agoYeah but it's a cooked, ready to serve chicken. If you had to prepare it at home that's several hours of your time, energy for your oven, etc. and oven baked will not get the same result as rotisserie.
- qubex 8y agoYeah... the leading quote screamed “loss leader” at me, and the whole article that ensues tries to dispel that notion; in my mind it fails, because I’m left with the feeling that they’re doing their best to minimize the loss they make on unit economics but still provide a subsidy from their overall operations.
- grendelt 8y ago"Enigma" It's called a loss leader.
- dsr_ 8y agoWell, if they were actually losing money on it, it would be a loss leader. But since the actual cost of the dog, bun, cup, soda, paper plate, napkins, condiments, labor and depreciation comes in under $1.50, it's not a loss. It's just money left on the table. Except -- it probably isn't. Costco isn't really a restaurant, it's a store which carries a limited number of high-value items packaged in bulk. The hot dogs (and the other low-priced food up front) are a form of complementary good, which more than pays for itself by enticing people to come in on their lunch breaks and shop for fifteen to thirty more minutes than they would if they had to stop for fast food somewhere else. And it keeps kids quiet when the parents want to spend more time there. Department stores have repeatedly rediscovered the utility of having a decent food option available on-premises - Neiman Marcus, Macy's, Ikea.
- dreae 8y agoIt's absolutely a text book loss leader. A loss leader doesn't need to be sold below cost, only below its minimum profit margin. Leaving money on the table is effectively losing money.
- mmt 8y agoI think you've said two different things here. > A loss leader doesn't need to be sold below cost, only below its minimum profit margin. I think that's an important point, in that you're saying that it's incorrect to consider only the cost of ingredients, rather than the entire cost of delivery (including cooking, labor, etc.). On the other hand, as the parent pointed out, they're not a restaurant, so their "minimum profit margin" for this particular activity is zero. As such, they can afford to do it, at whatever volume, indefinitely. > Leaving money on the table is effectively losing money. This is the different thing, since it has to do with what the market will bear and not with what it costs them. The distinction is important because a business can, by this definition, "effectively lose money" while still making a profit. That's good enough for some people.
- HenryBemis 8y agoSo (I assume) this is where IKEA got the idea from, with their $1.5 hotdog in the exit of every store. Someone even made a comparison! [1] [1]: https://dailyhive.com/vancouver/review-it-costco-hot-dog-vs-ikea-hot-dog/ https://dailyhive.com/vancouver/review-it-costco-hot-dog-vs-...
- hotdog97 8y agoSo I just had to Google this. According to https://newsroom.inter.ikea.com/news/ikea-develops-a-veggie-hot-dog-for-the-ikea-bistro/s/fa6dd766-e889-4439-970c-897d554e1d89 https://newsroom.inter.ikea.com/news/ikea-develops-a-veggie-... "The hot dog at IKEA has a long history: In 1981, and true to his vision for IKEA to be affordable for the many, Ingvar Kamprad set the price of the IKEA hot dog at 5 Swedish Krona – which was half price compared to competitors in Sweden at that that time. It was the beginning of the success story of the IKEA hot dog that today is served at IKEA all over the world." So, Ikea Sweden introduced a hot dog priced at 5 SEK in 1981. (The USD was super cheap at that time; my best guess is that this corresponded to like $0.90.) According to Costco themselves, their hot dog enterprise started in 1984: http://www.costcoconnection.com/connection/200903/?u1=texterity&pg=25#pg25 http://www.costcoconnection.com/connection/200903/?u1=texter... Myself: I don't think IKEA in Sweden were even on the radar for these Costco people in San Diego in 1984. I don't think they "copied" this concept. But it's safe to say that IKEA did not got this idea from Costco. Interestingly, the price for a hot dog at IKEA in Sweden is still 5 SEK, 37 years later.
- tomlor 8y agoOne of my gripes about this price point is that they downgraded the buns they use with their hot dogs a few years ago. They used to be these tasty, substantial picnic rolls, but now they're bland and bready. I'd happily pay a few cents more to get the better buns. The real kicker is that if you look at the photo of the hotdogs in their food courts (in SoCal, at least), the photos are of the old, picnic style buns and NOT what they are serving today - a bait-and-switch (bake-and-switch?) if you ask me...
- flyGuyOnTheSly 8y agoThe buns are declining in quality... you have to ask for the free toppings now (like onions and sourkraut which were always kept in the condiments counter until a year or two ago). They are now kept in carefully measured tiny plastic containers completely void from view. And the quality of the "meat" inside has dropped off a cliff in recent years. I don't enjoy them at all anymore, where as I used to go into Costco sometimes just to get their hotdogs. It's not the same $1.50 hotdog when they change literally everything about it.
- washadjeffmad 8y agoThat's local to your area. We still have the hand crank onions and ketchup/mustard/brown mustard/relish dispensers, and the dogs have been the same in my region for at least the last six years.
- flyGuyOnTheSly 8y agoAnd where do you hail from, good sir?!
- Waterluvian 8y agoWasn't there some thing about people making massive plates of "kimchi" with those free condiments?
- flyGuyOnTheSly 8y ago
- jbigelow76 8y ago"Enduring Enigma" seems like a grandiose way to describe a loss-leader marketing gimmick, good for Costco for suckering bored writers though.
- znpy 8y agoTL;DR: It's a sales driver.