Acquired · Costco · Overview
Costco
Membership fee is the profit; merchandise margin is approximately zero.
Major events · 1976–2024
- 1976Founding
Sol Price founds Price Club
Price launches the first warehouse club in San Diego, targeting small-business buyers. Sinegal joins as an early operator after a decade at FedMart under Price.
Acquired episode Costco
- 1983Founding
Costco founded in Seattle
Jim Sinegal + Jeff Brotman launch Costco, extending Price's warehouse model to consumers (not just business members). First warehouse opens September 1983.
Acquired episode Costco
- 1985Product
$1.50 hot dog combo launches
Sinegal sets the food court hot dog + soda combo at $1.50. Becomes the most-photographed price in retail and the brand's central trust signal.
Acquired episode Costco
- 1993Acquired co.
Costco-Price Club merger (PriceCostco)
The two clubs merge into PriceCostco. Brings Sol Price's original creation back together with Sinegal's extension.
Acquired episode Costco
- 1997Strategic shift
Split back into Costco Companies
PriceCostco splits; Price's heirs take Price Enterprises (real estate), Sinegal's team keeps the operating business as Costco Companies, Inc.
Acquired episode Costco
- 2002Market
Costco passes $40B revenue
Becomes a top-10 US retailer; the membership-fee profit model is fully validated at scale.
Costco annual filings
- 2012Leadership
Sinegal retires; Craig Jelinek becomes CEO
Sinegal hands operating control to Jelinek (longtime Costco operator). The famous "if you raise the price of the f***ing hot dog, I will kill you" line is directed at Jelinek.
Acquired episode Costco
- 2018Cultural
Jelinek confirms hot dog price will never change
At a shareholder event, Jelinek publicly confirms the hot dog price is sacred. The signal becomes a meme; the meme amplifies the brand at zero marketing cost.
2018 Costco shareholder remarks
- 2024Leadership
Ron Vachris becomes CEO
Jelinek retires; Vachris (29-year Costco veteran, started as forklift driver) takes over. Same operating philosophy — the leadership continuity IS the strategy.
Costco 2024 announcement
- 2024-08Acquired covered
Acquired covers Costco
Ben and David's full episode on the company; Munger's repeated public praise and the membership-economics framing crystallise.
https://www.acquired.fm/episodes/costco
Origin
Members pay an annual fee for the right to shop; merchandise margin stays near zero — the fee IS the business.
Sinegal apprenticed for ~25 years under Sol Price — first at FedMart, then at Price Club (founded 1976, San Diego). Price had already proved the warehouse-club model worked for small businesses. Sinegal co-founded Costco in Seattle in 1983 with attorney Jeffrey Brotman, taking Price's model and extending it to consumers. The two companies merged in 1993 (PriceCostco), split again in 1997, and Costco emerged as the dominant form. Charlie Munger sat on the Costco board for decades; Berkshire held a position for nearly as long. The whole arc is a story of one model, two generations, and an unusually long mentorship between Price and Sinegal.
Key facts
Annual revenue (FY2024)
$254B
Annual membership fee revenue
~$4.8B
Net income returned to shareholders (FY2014–2023)
~80%
Paid memberships
73M+
Warehouses worldwide
890+
Gross margin
~12%
SKU count per warehouse
~4,000
Kirkland Signature share of sales
~30%
Hot dog + soda combo price
$1.50
Episodes · 1 covering this company
Hooks from these episodes
Costco built a business where the membership fee is the profit and the merchandise margin is roughly zero. Charlie Munger called it his favourite company of all time and sat on the board.
Two opposite characteristics combining to create something neither could on its own.