The Founder Who Forbade a Price Rise

"If you raise the effing hot dog, I will kill you. Figure it out." The line is Jim Sinegal's, co-founder of Costco, addressed to Craig Jelinek, then the chief executive, who had suggested that the hot dog was losing money and should cost more. Jelinek told the story himself, in a speech to a local chamber of commerce in 2018, and it was later fact-checked by people who check such things, because it sounded too good to be true. It was true. Jelinek figured it out. The company started making its own sausages so as not to depend on a supplier, and the price stayed.

The price is one dollar and fifty cents for a hot dog and a soda, unchanged since 1985. Four decades of inflation, crises and changes of management, and the number on the board is the one someone wrote when a dollar and a half meant something else. About 135 million hot dogs a year, each sold, by any reasonable arithmetic, at a loss.

The word I read most carefully in this story is "never." One exception is enough to demote a small refusal to a habit, and habits make no stories. All the value of the hot dog lies in "never," and never is the hardest word in business, because at every budget meeting someone has a perfectly reasonable motive to make an exception just this once. Sinegal did not discuss the motive. He forbade the discussion, and the prohibition became the brand.

Few owners take this mechanism seriously. Small noes, kept without exception for decades, become stories the market tells by itself. Consistency turns a trivial detail into evidence of character. What people grow fond of is the company that would not touch the hot dog even when inflation gave it every reason, because a price held for forty years says something about a company that no values page can say, that when it promises a thing, it keeps the promise even when it costs.

Costco also spends almost nothing on advertising, and Sinegal explained why with an economy of words any communications director would envy. Advertising, he said in 2013, is evil, because it costs money, and anything that is going to raise our price on merchandise is bad. The business press writes about the unchanged hot dog every few months, each time for free, each time with admiration, in a quantity of space no paid campaign would have bought.

One can object that a loss-making hot dog is a marketing expense in disguise, and the objection is correct, with one precision. It is the best marketing expense in American retail precisely because it was never designed as one. An advertisement that says "we are consistent" convinces nobody. A price that has not moved in four decades convinces without saying anything, and it cannot be copied by a competitor, who would have to start now and wait forty years.

Your hot dog may be the hour at which you answer the phone, the deadline you have never missed, the price of the basic service you have not raised in five years, the small thing your customers know about you without it being written anywhere. The product is not the brand. The refusal to betray it is the brand, and the refusal is worth exactly the number of exceptions you did not make.

A brand story without a budget starts with a small thing, stubbornly kept. What is the small refusal your company could keep, without a single exception, for the next ten years? And when did you last make an exception "just this once," and who found out? I will ask you for one thing. Choose one thing your company will not change, whatever happens, and write it with the word "never" beside it, because at Costco that word is worth more than all the advertising budget they never spent.