How This $1.50 Hot Dog Makes Costco a “Must-Own” Stock

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There are 30 Major League Baseball (MLB) stadiums across the United States and Canada.

Nearly 65 million fans spin the stadium turnstiles each year.

I go myself — here in Baltimore, home of TradeSmith’s headquarters — to Camden Yards, the home for the Baltimore Orioles.

And when I head to the ballpark — with my family, or with the clients I entertain as an entrepreneur and CEO — there’s one thing I always get.

A hot dog. (Hot dogs don’t quite rank up there with bacon, my absolute favorite food, but it’s still pretty high on the “Keith’s Favorite Foods” list.) Millions of baseball fans do the same — watch a game with “a dog and a beer” — so it’s no surprise MLB is one of the world’s biggest sellers of hot dogs.

One of the biggest…

But not the biggest.

That honor falls to Costco Wholesale Corp. (COST), the largest warehouse club in America.

Costco sells four times as many hot dogs as all those stadiums across the United States and Canada.

It’s just a great story: A tale of tradition, customer commitment, and a focus on value.

It’s a tale that kicks inflation right in the teeth. And it’s a great moneymaking opportunity, recently spotlighted by my good friend Andy Swan — senior analyst over at Derby City Insights.

Here’s what they found.

The Costco Hot Dog: A Beacon of Value

The Costco Hot Dog is a testament to the membership club’s commitment to value. Folks go crazy for it.

Maybe that’s because Costco has been delivering the same great deal — a jumbo hot dog and 20-ounce soda for just $1.50 — since 1985…

Meaning the company has refused to raise the price. (If it had boosted prices just to keep pace with inflation, that one-two combo should cost $4.28 in today’s money.)

And that’s earned Costco some lifelong fans — and dedicated customers.


This little snack-while-you-shop offering is just one of many reasons Costco has maintained its muscle — navigating its way through the COVID pandemic, the inflationary firestorm, interest-rate spikes, and inflation… each of which has squeezed consumer spending.

I grant you, Costco isn’t immune to these challenges — all retailers are feeling the pinch — which is why its latest earnings report came in a bit light on projected revenue ($53.65 billion versus a projected $54.75 billion).

Indeed, in a talk with investors, CFO Richard Galanti conceded: “This is the second quarter that we’ve seen that discussion of lower sales of big-ticket discretionary items.”

Even with the challenges, Costco’s stock is up more than 20% year-to-date. The company’s core strategy — its business model — sets it apart.

Why Costco Reigns Supreme

Memberships are Costco’s bread and butter, generating a supersized $4.2 billion in fees alone for the company last year. That stream of cash is steady and predictable, and gives Costco some extra muscle, even if consumer spending throttles back.

For $60 to $120 a year, folks can come in — enjoy that hot dog and Coke – and browse or shop to their heart’s content in one of 856 Costco Warehouses around the world.

As of May, Costco boasted 124.7 million cardholding members — with an insane sky-high renewal rate: 93% of American members re-upped in 2022 so they could keep coming back for more.

Bulk food items, a new laptop for your off-to-college son or daughter, furniture — just about anything you can imagine — is available at Costco… for an unbeatable warehouse price.

Members dig this: According to the consumer insights machine Andy and his brother Landon built, Costco holds the highest Consumer Happiness among comparable retailers in the LikeFolio universe. That means folks are raving about Costco on social media, way more than they are about other warehouse clubs.

And if you go to Costco, you know why.

Its Kirkland Signature in-house brand has redefined consumer expectations and set a high bar for other store brands. You can even find Kirkland Signature products on Amazon.com (AMZN) and at Walmart (WMT).


Many of those products are supplied by consumer favorites, like coffee from Starbucks, or jellybeans from Jelly Belly — which Costco is able to sell at much lower prices.

It’s also got an “in” with fine wines, which the warehouse club can sell at a member discount because it deals directly with the wineries (no middleman involved).


And, at just $4.99, you can’t find a rotisserie chicken cheaper anywhere than at Costco.


The secret to such low prices? The chickens come from Costco’s own chicken farm, which it built to bring down its own production cost by 35 cents per chicken.

Controlling the supply chain was an admittedly aggressive move. But it meant Costco wouldn’t have to raise prices for members. And considering the Costco Rotisserie Chicken Facebook fan page has a whopping 19,000-plus followers…


…it’s proved to be a savvy move.

Costco does just about everything it can to hold the line on prices for its members.

In fact, rather than have to raise the price of membership — or even consider raising the price of its beloved hot dog combo — Costco announced in June it would be cracking down on membership IDs in the self-checkout line.

So don’t even try to sneak one of those $4.99 chickens through self-checkout if you conveniently “forget” your ID.

Just join the Costco cult… like the rest of us.

Demand Stays Strong

Costco Purchase Intent — that’s how Andy and his team measure demand — has surged 28% higher year-over-year. And they expect demand to stay strong.


By continually focusing on delivering quality, value, and satisfaction, Costco has put itself in elite territory.

And it has rewarded shareholders richly in the process — returning 137% over the last five years, and 21% in 2023, as of this writing — despite the challenging economic headwinds.