Why Warren Buffett's Billionaire Business Partner Loves Costco Hot Dogs

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Inflation won’t take away Costco’s $1.50 hot dogs.

Key points

  • The $1.50 hot dog deals are just one of the reasons Charlie Munger loves Costco.
  • The popular retailer has kept hot dog prices low for almost 40 years.
  • Bulk buying, batch cooking, shopping around, and maxing out cash back rewards can all help combat rising food costs.

Warren Buffett’s right-hand man, Charlie Munger makes no secret of his admiration for Costco. The billionaire investor has served as a director of the popular retailer for around 25 years and is an outspoken Costco devotee. He even owns around $90 million worth of Costco shares. And hot dog combos are just one of the reasons he holds the brand in such high regard.

Inflation won’t touch Costco’s hot dogs

According to Business Insider, if the price of Costco’s hot dogs had risen in line with inflation over the past 37 years, they’d cost over $4 today. But they are part of the Costco magic and the $1.50 price tag has become a thing of legend. One story has it that when Costco CEO Craig Jelinek dared to suggest upping the price, co-founder Jim Sinegal threatened to kill him. Jelinek instead went away and figured out how to keep the price low. Costco now has two hot dog manufacturing plants of its own and the chain also found ways to reduce its soda costs.

Not only do the hot dogs contribute to the retailer’s cult-like status, they also save the company money on advertising and they generate goodwill. Put simply, the food combos may lose money but they win people’s loyalty. Last year, over 90% of its U.S. customers renewed their memberships and those hot dogs do play a part.

For Charlie Munger, the hot dog combo is emblematic of the brand’s consumer-driven culture. He admires Costco’s commitment to passing savings onto customers and the way it prioritizes long-term success over short-term profits. Munger thinks that Costco does more for civilization than the Rockefeller Foundation.

How to beat inflation at the grocery store and beyond

The price of Costco hot dogs and food court items will likely stay low no matter what. Sadly, we can’t live on hot dogs and rotisserie chicken alone, and inflation has pushed up the cost of other items throughout the country. If you’re trying to reduce your grocery bill, here are a few money-saving tips:

1. Buy in bulk

Costco has great deals for people who buy in bulk. But wherever you shop, bulk buying can be a good way to save money. There is a caveat though: You need to use your bulk purchases before they go bad. That isn’t the case for toilet paper or cleaning products, but even staples like pasta and rice won’t last forever.

When you buy in bulk, focus on items you use a lot, preferably ones with a long shelf life. And don’t experiment with new brands en masse. Nobody wants to be stuck with 20 bars of soap that bring the family out in a rash or or a stack of canned soups that nobody will eat.

2. Reduce food waste

We waste about a third of the food we produce at various stages of the cycle. Use food waste apps to get big discounts on produce that restaurants or stores would otherwise throw away. As long as you don’t mind a few misshapen veggies, there are bargains to be found.

Reduce food waste at home by freezing items that are close to their expiration date. Milk, eggs, and grated cheese all freeze well (though you do need to take the eggs out of their shells). The freezer is your friend when it comes to batch cooking as well. If you’re cooking up a stew or pasta sauce, make up two or three times as much as you need for one meal. It saves time, maxes out the value of any bulk savings, and gives you meals on standby for nights when you don’t have time or energy to cook.

3. Maximize your cash back

Right now, groceries likely make a bigger hole in your monthly budget than ever. You might as well get rewarded for that extra spending. Look for cash back apps that will pay you for spending you would have done anyway. Many will also highlight coupons you can use to get extra discounts.

If you have a credit card that pays decent rewards on grocery shopping, use it. The benefits of credit card rewards combined with cash back apps can go some way to offsetting the costs of inflation. But make sure you pay off your card balance at the end of the month so those high interest rates don’t eat into any gains.

4. Shop around

At the risk of alienating die-hard Costco fans, it isn’t always the cheapest place in town. It can be a hassle and a time-suck to stop at more than one shop, but if you live near a couple of different grocery stores, shopping around may be worth the effort. You’ll quickly get a feel for which products are better value at a particular store, so you don’t have to compare prices every time you stop for groceries.

Bottom line

Charlie Munger loves Costco hot dogs because they represent some of the brand’s core values. For consumers, those $1.50 hot dog deals are a reminder that the chain won’t let you down when it comes to keeping costs low. But it can still be worth shopping around. That hot dog equates to a very small portion of your monthly food costs, so don’t let it blind you to better deals elsewhere.

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