Costco (NASDAQ: COST) has an official soft drink used in one of its most iconic services. The $1.50 hotdog was served with Pepsi for years. Suddenly, Pepsi is out, and Coke is in. Costco CEO Ron Vachris said on Costco’s earnings call “We will be converting our food court fountain business back over to Coca-Cola.”
Pepsi first got its spot as Costco’s official drink in 2013. As CNN pointed out, this was not only a win to be part of the $1.50 hotdog program. “The deal is not just for the machines and syrup in the sodas, but cups, straws and other products,” the news channel reported. It further reports that Costco sold about 150 million $1.50 hotdogs last year.
It is hard to underestimate the value of the deal to Coke parent Coca-Cola (NYSE: KO). Costco has 624 massive warehouse stores in the US. It has 137 million people who pay to shop at its stores using the Costco membership program. The program has two tiers. The first is “Gold Star” members who pay $65 a year. The upgraded deal is called “Executive Membership”. Each allows people to shop at Costco stores and at its website. “Executive” members get special deals and 2% back on their purchases.
Coco-Cola uses a huge sponsorship program to build its brands and promote its products. It spends hundreds millions of dollars a year on these. They include the Olympic Games, NFL stadiums. Major League baseball, NASCAR, and NCAA championships.
The Costco deal is part of the worldwide branding strategy for Coca-Cola.
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