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Why Costco’s $1.50 hot dog combo and 99-cent Arizona iced tea still cost the same

Why Costco's $1.50 hot dog combo and 99-cent Arizona iced tea still cost the same
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CNN business

The highest rate of inflation has for decades forced companies to raise the prices of food and other products once considered sacrosanct.

Among the victims of inflation: $1 prices at Dollar Treethe $1 piece Pizza in New York City, Little Caesars’ $5 Hot-N-Ready PizzaMC Donalds Dollar Drinks Deals and more.

However, there are still a few things that cost the same as they always have.

The signature 23-ounce can of Arizona iced tea is still 99 cents, the same price since it debuted 30 years ago.

The family business sells around 1 billion of the 99-cent Big AZ Can, as it is known internally, every year, according to the Los Angeles Times reported In April.

“I’m committed to that 99-cent price — when things go against you, you tighten your belt,” Don Vultaggio, the company’s 70-year-old founder, told the newspaper. His reasoning: raising prices and losing customers as a result is simply not worth the short-term profit.

Arizona — which got its start in Brooklyn — keeps costs down by spending less on marketing than other beverage brands and makes most of its profits by selling higher-priced fruit drinks, energy drinks, bottled teas, snack foods, hard seltzer and other products .

Costcos Hot dog soda deal at its food courts has cost $1.50 since its introduction in the mid-1980s.

The hot dog offering emerged in the early days of the company. Costco added a Hebrew National booth at its second warehouse in Portland, Oregon, shortly after it opened in 1983.

To keep the hot dog’s price stable, Costco has found ways to reduce other costs in the food court, such as:

Customers wait in line to order below the signage for the Costco Kirkland Signature $1.50 hot dog and soda combo.

Costco

(COSTS)
sold kosher hot dogs at its food courts until 2009, but suppliers were running out of meat. So the chain brought production in-house and switched to their own Kirkland Signature brand hot dogs. Costco

(COSTS)
now produces around 285 million hot dogs at its California plant.

Jim Sinegal, once co-founder of Costco said the company’s current CEO, Craig Jelinek, “If you raise that damn hot dog, I’ll kill you. Find out.”

“I know it sounds crazy to make a big deal about a hot dog, but we spend a lot of time on it,” Sinegal said Seattle Times in 2009. “We’re known for this hot dog. You don’t mess with that.”

Last year, Costco sold 122 million hot dog and soda combos worldwide.

Despite a 16.4% annual increase in wholesale chicken prices Clubs and other grocery stores have kept fried chicken prices low.

Fried chicken stays at Costco for $4.99, as it has for more than a decade, as well as BJ’s Wholesale Club

(BJ)
. At Sam’s Club they haven’t cost a cent less for more than five years.

There is a strategy behind these stores’ decision to keep these prices constant.

The fried chicken is a popular product for supermarkets because it attracts customers to the stores. Customers typically buy more than one chicken in one visit. Because of this, retailers want to remain competitive on fried chicken prices and are willing to lose money on sales, even if production costs increase.

Additionally, shoppers know exactly how much their fried chicken costs and they will see an increase. The price of a fried chicken helps determine the consumer’s overall perception of the value of a deal.

Even though BJ’s fried chicken production costs have skyrocketed, the company has kept prices firm because it’s “such a meaningful cause for our members,” CEO Bob Eddy said on a conference call in May.

However, the effort Costco has made to keep its chickens is $4.99 on the test bench.

The retailer is facing a lawsuit from two shareholders alleging that Costco and its top executives allowed the abuse of chickens in violation of animal welfare laws.

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