Costco has made its food court a sort of frozen-in-time offering. The warehouse club has been adamant that it will never change its $1.50 hot dog and a soda combo offer (even though it has raised prices on other items it sells in the food court.
That's something CFO Richard Galanti was especially adamant about during a recent earnings call.
“Some businesses that are doing well with margin those things help us be more aggressive in other areas, or, as you mentioned, hold the price on the hot dog and the soda a little longer -- forever,” he said.
DON'T MISS: Costco Has a Surprise Answer to Walmart's Sam's Club Plan
That's a gimmick. It doesn't really hurt Costco (COST) to sell a hot dog and a soda at that price. In fact, it likely isn't even a loss leader as neither hot dogs nor soda costs the chain all that much. Keeping the price "forever" simply reinforces the idea that the warehouse club puts its members first.
Costco has, however, been protective of its food court offerings. It rarely adds new items and when it does, it tends to move slowly. That's what's happening right now as the chain has added a new dessert treat to its food court, but only (for now) in select locations.
Image source: Shutterstock
Costco Adds a New Ice Cream
Costco currently offers a small array of desserts. Members can get soft-serve ice cream, shakes, and sundaes. You can also order a float with vanilla soft-serve served on top of a cup of Pepsi.
It's a simple, but effective, offering that complements the chain's lineup of pizza, hot dogs, sandwiches, and salads. Costco keeps its menu simple for the same reason it limits the number of products it stocks in its stores. If you buy more of each item, you can keep the price down.
Now, however, Costco is testing a new food court offering at select locations and it looks a lot like something McDonald's (MCD) sells nationwide. It also borrows from a tactic Yum Brands (YUM) uses to keep its menu fresh.
Costco has been testing a cookies and cream mix-in to its vanilla soft serve as well as a version that adds Skor, a chocolate-covered toffee candy bar, to the ice cream base. That gives it a product that looks a lot like a McDonald's McFlurry.
The news was first reported by the Instagram account, we_love_costco.
"Some fans in the comments section compared this new treat to the Dairy Queen Oreo Blizzard and the Oreo McFlurry from McDonald's, noting that at just $4.99, this is a bang for your buck," FoodBeast reported. "Fans said Costco's Oreo ice cream is almost, '3x the amount of Oreo than in a DQ Blizzard and about 8x the amount of Oreo found in a McFlurry."
A Smart Move By Costco
While the new McFlurry-like product is only being sold in Canada, it's a smart way for Costco to expand its food court menu without adding a lot of new expenses. Basically, the warehouse club is using a tactic that Taco Bell uses a lot. It's adding a new ingredient that allows it to customize one of its core products.
Adding Oreo crumbles and Skor bits doesn't overly complicate the chain's preparations but it does allow Costco to offer two exciting new treats. In theory, that could expand to offering both new toppings as options for its sundaes as well.
Costco can keep its food court -- which rarely changes -- fresh by making small tweaks like this. Even a "flavor of the month" type offering might entice members to visit slightly more often, which would increase their ties to the chain.
That's the reason Costco makes any move. It wants to enhance the value of being a member in order to drive renewals. Oreo and candy bits won't do that on their own, but as part of a broader effort, this type of change is good for the chain and its members.
