By Martin Baccardax
Costco's new CEO, Ron Vachris, may have done something that neither his predecessor, Craig Jelinek, nor co-founder Jim Sinegal have been able to do for more than four decades. And it could be the start of something huge.
Vachris told Costco shoppers in an Instagram post last month that Costco's hot dog and soda combination, which has been priced at $1.50 since 1985 and generated more than $370 million in sales last year, "will not change as long as I'm around."
"Amazing quality, amazing value," he added.
Well, yes. But also no.
The combo looks to have undergone its first significant change since 2009, when Costco switched out Hebrew National for its own in-house production process, which ultimately led to the creation of its own Kirkland Signature brand hot dog.
Costco members in certain states are now able to switch out the traditional 20-ounce refillable soda, which has been paired with the hotdog since its inception 40 years ago, with a 16.9--ounce bottle of Kirkland Signature water, according to multiple media reports.
Costco executives weren't immediately available for comment.
The change might feel financially irrelevant given that, while a bottle of water costs marginally more than a fountain-poured soda, the ability to get a refill of the soda negates price savings. The broader scope of the move, however, is potentially transformational.
In its last fiscal year (ended September), Costco sold more than twice the number of hot dogs sold by all 30 Major League Baseball teams and U.S. 7-Eleven stores combined.
But Costco loses money on virtually every sale, given that costs overcome revenue in a product that should generate closer to $4.70 for the hot dog alone, according to the U.S. Bureau of Labor Statistics inflation calculator. That hasn't stopped Costco from holding prices in check, or from taking advantage of the massive amounts of free publicity the combo price has afforded the $440 billion retailer over the past four decades.
"If you raise the [effing] hot dog, I will kill you," founder Jim Sengal told former CEO Craig Jelinek, according to Jelinek's recounting of a conversation between the two. "Figure it out."
CFO Gary Millerchip pledged on his first call after taking the job two years ago that the $1.50 price tag was "safe."
The new changes, however, suggest a more complicated environment for the signature combo.
Costco is reaping billions of dollars from the sale of gasoline at its 580-plus stations, thanks in part to a 55% increase in prices tied to the U.S. war in Iraq. The company's adjusted U.S. sales were up 6.2% over the four weeks ending on April 5, with gas volumes rising by more than 20%.
But, as Mizuho analyst David Bellinger notes, the lower-margin fuel business can eat into company-wide profits "with only minimal incremental earnings flowthrough on higher revenues."
"We're now modeling a 20 basis point gross margin headwind to our previous estimates, stemming from a higher mix of fuel sales," Bellinger wrote in a note earlier this month. "This applies to each of the next several quarters and as national average gas prices approach the psychological $5 per gallon barrier."
That probably won't hurt the company however, which remains a "top pick" in the Mizuho stable. But it does raise questions with respect to how long high gas prices can be offset by other margin improvements in the broader business.
Costco shares have outpaced the S&P 500 by more than 5% over the past six months but have trailed the benchmark's 28.3% gain over the past year. The retailer recently raised its quarterly dividend, and talk of a stock split, the first since 2000, has started to circulate on Wall Street.
The hot dog combo price isn't likely to change soon given the public comments from senior executives and the broader signaling on costs and brand marketing that it represents. But changes come slowly, and then quickly, at Costco. Membership costs have risen only eight times since 1983, the last of which came in September of 2024. That took overall fees to $5.3 billion in 2025.
Substituting water for soda doesn't seem like much, but it does mark the first significant change to the combo in more than 15 years. What happens next is anyone's guess.
Write to Martin Baccardax at martin.baccardax@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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April 29, 2026 13:31 ET (17:31 GMT)
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