Just like the streaming wars and airline wars, there are also the hot dog wars. Namely, discussions around customer loyalty and why offering a good deal can sometimes be more important than overhead costs.
For decades, big-box food giant Costco (COST) has maintained its $1.50 hot dog and soda combo even amid passing years and rampant food inflation. Many have memories of looking forward to a trip to the Costco food court after a family trip to Costco dating back to the 1980s while the "inflation-resistant" combo has inspired multiple pop culture references.
"If you raise the effin' hot dog, I will kill you," Costco co-founder Jim Senegal once famously told current CEO Craig Jelinek in 2018 as the latter speculated about a looming price raise amid the rising cost of food. "Figure it out.”
Jelinek did "figure out" Costco shoppers cult love of its hot dog combo and, last September, CFO Richard Galanti committed to keeping the price of its hot dog and soda combo at $1.50 "forever" in its fourth-quarter earnings call last September.
Sam's Club Took The Hot Dog Wars To A New Level
Galanti told investors that customer happiness and loyalty about it would allow the chain to "be more aggressive in other areas" when it comes to the profit margin.
But even freezing the price was not enough when competitors are slashing theirs -- while somewhat less ingrained in American food culture than Costco's, Walmart (WMT) offshoot Sam's Club also had a $1.50 hot dog and soda deal since the 1980s.
In November, the chain took aim at Costco by lowering its combo price by 12 cents to $1.38 for a quarter-pound hot dog and a 30-ounce soda of the customer's choosing.
"There's bigger story at play here," the retailer said when it announced the combo. "This is a signal. It's indicative of the journey we're on -- to make the Sam’s Club membership the most valuable subscription you have. And in this case, that means working it twelve cents at a time."
Sam's Club/TheStreet
The Hot Dog Combo Once Again Goes Viral
After an initial flurry of coverage, the hot dog price cut once again started trending on Twitter and Google (GOOGL) after a Los Angeles Times reporter tested both the Costco and the Sam's Club combo to rank which one is better.
"The dog, in a slightly too-dry bun and which looked just a bit smaller than Costco's, tasted virtually identical," Lucas Kwan Peterson writes in the article that ultimately sides with the Sam's Club deal due to a larger number of toppings but rules that the combo deal also "should not be a race to the bottom pricewise."
Immediately, Twitter users started weighing in on whether the 12-cent price difference would make a difference to either the chain or people's shopping habits. Families who do their food shopping at one or the other are generally very loyal to the brand and will not make the switch even with price cuts on more significant items.
All in all, the 12-cent cut is about optics and maintaining the illusion of giving customers a "good deal" -- while making no promises about the permanency of its prices, another longtime player in the cheap hot dog and soda game is furniture giant IKEA with its $1 hot dog.
"What a historic day for capitalism," one Twitter user concluded.
