Why Costco’s $ 1.50 and 99-cent Arizona iced cheese combination still costs the same

New York
CNN Business
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The highest inflation rate in decades has forced companies to raise the prices of food and other products that were once considered sacred.

Among the list of inflation offers: $ 1 prices on the Dollar Tree, $ 1 pizza in New York City, Little Caesars’ Hot-N-Ready pizza for $ 5, McDonald’s dollar drink deals and more.

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

The distinctive 23-ounce box of iced tea in Arizona still costs 99 cents, the same price it has been since its debut 30 years ago.

The family-owned company sells about 1 billion of the 99-cent Big AZ Can, as it is called internally, every year, the Los Angeles Times reported in April.

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

Arizona – which started in Brooklyn – keeps costs down by spending less on marketing than other beverage brands and earns most of its profits by selling more expensive fruit drinks, energy drinks, bottled, snacks, hard seltzer and other products.

Costco’s sausage soda deal at the food halls has cost $ 1.50 since it was introduced in the mid-1980s.

The sausage offer was born in the company’s early days. Costco added a Hebrew National booth at its second warehouse in Portland, Oregon, shortly after it opened in 1983.

To keep the price of the sausage stable, Costco has found ways to cut other costs on the dish, such as switching from 12-ounce soda cans to cheaper 20-ounce fountain drinks.

Costco (COST) sold kosher sausages in its food halls until 2009, but suppliers began to get little meat. So the chain took production internally and switched to its own sausages from the brand Kirkland Signature. Costco (Cost) now produces around 285 million sausages at the factory in California.

Jim Sinegal, Costco’s co-founder, once told the company’s current CEO, Craig Jelinek, “If you raise that effe sausage, I’ll kill you. Find out.”

“I know it sounds crazy to make a big deal about a sausage, but we spend a lot of time on it,” Sinegal told the Seattle Times in 2009. “We are known for that sausage. It’s something you do not mess with. »

Last year, Costco sold 122 million sausage combinations worldwide.

Despite a 16.4% increase in chicken prices from year to year, wholesale clubs and other merchants have kept rotisserie chicken prices down.

Rotisserie chickens remain $ 4.99 at Costco, as they have been for more than a decade, as well as at BJ’s Wholesale Club (BJ). At Sams Club, they have cost a penny less than that for more than five years.

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

The rotisserie chicken is a valued item for supermarkets because it draws customers into stores. Usually, customers will shop around and buy more than just a chicken when they visit. This is why retailers want to be competitive on rotisserie chicken prices and are willing to lose money by selling them even when production costs increase.

In addition, buyers know exactly how much their rotisserie chicken costs, and they will notice an increase. The price of a rotisserie chicken helps to set consumers’ general perception of a store’s value.

Although BJ’s production costs for rotisserie chickens have increased, the company has kept prices steady because it is “such a meaningful thing for our members,” CEO Bob Eddy said at an earnings interview in May.

However, the length Costco has gone to keep its chickens $ 4.99 is under investigation.

The retailer is facing a lawsuit from two shareholders claiming Costco and the top executives allow the mistreatment of chickens in violation of animal welfare laws.