Costco refuses to raise the price of its $1.50 hot dog combo despite painful inflation.

  • Costco has charged $1.50 for a hot dog and soda for 37 years, and inflation won’t change that.
  • Costco’s pricing of its hot dog combo is a testament to its business model, experts say.
  • Charlie Munger admires the retailer for constantly driving down prices without sacrificing quality.

Costco has stubbornly charged $1.50 for its hot dog and soda combo for nearly four decades now — and it has no plans to raise that price, even though US inflation has now surged to a 40-year high.

The big-box retailer’s dedication to cutting costs without sacrificing quality, then passing on those savings to customers in the form of lower prices, has won the admiration of investors such as Charlie Munger, Warren Buffett’s business partner and Berkshire Hathaway’s vice-chairman.

“If once or twice in a lifetime you’re associated with such a business, you’re a very lucky person,” Munger said about Costco in 2011.

We wanted to know why Costco hasn’t hiked the price of its signature meal deal, and how the $1.50 cost exemplifies what Munger loves about the company.

Says Darren Pollock, the president of Cheviot Value Management:

“The $1.50 hot dog is a product of Costco’s customer-centric culture,” Pollock said. “It’s a symbol that the company need not make money on every item that it sells. How many other retailers are known for that?”

Pollock added that cheap hot dogs make existing members happy and attract new ones, representing a win-win for Costco. The retailer’s philosophy of delighting its customers with unmatched bargains appeals to some of its biggest fans, he continued.

“Charlie Munger loves the Costco culture for treating its customers well by providing them with the lowest possible prices for the goods it sells,” he said.

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