[Global Focus] Recession-Proof Products Dominate in U.S.… Spotlight on "$1.50 Hot Dog, 99-Cent Iced Tea"

Hot Dog Combo Set Stays at $1.50 for 40 Years... Should Be Three Times Higher
The 'Tariff Shadow' Looming Over the Food Industry

Costco's $1.50 hot dog and Arizona Iced Tea for $0.99 have recently been receiving what people call a "shout-out"-a term used to express thanks or respect. This comes as grocery prices in the United States have soared to unprecedented heights following the COVID-19 pandemic, and the "tariff bill" triggered by President Donald Trump is now starting to take effect in earnest. According to U.S. political media outlet Axios, these products, which have maintained "nostalgia-priced" tags for decades, are said to be "defying inflation."

Hot Dog Combo Set, $1.50 for 40 Years... Should Be Three Times More Expensive

The "hot dog combo set" at Costco, the warehouse-style retailer that also operates in Korea, has been sold for $1.50 since it was first introduced in 1985, maintaining the same price for 40 years. While it started as a so-called "loss leader" to attract customers into the store, it has become an indispensable "signature product" beloved for decades. According to a New York Post article from April, if decades of inflation are factored in using the U.S. Bureau of Labor Statistics (BLS) inflation calculator, the actual price should be about three times higher, at $4.55.

The Arizona Iced Tea 22oz product, known as the "national beverage," tells a similar story. This product, which is about 650mL, is even larger than a Starbucks Venti size (591mL). It is a familiar drink, easily found in major supermarkets and various vending machines. The price is just 99 cents, less than a dollar, and it has remained unchanged for 33 years since 1992. This "99-cent price" is a core part of the brand identity, reflecting the conviction of founder and chairman Don Vultaggio. However, even he is reportedly considering a price increase due to President Trump's "50% tariff on imported aluminum," according to the New York Times. Arizona uses more than 100 million pounds of aluminum annually for can production, and the increased costs are becoming unsustainable.

Longstanding franchise giants like McDonald's and Pizza Hut have also launched discount strategies tailored to the economic downturn, aiming to "return to their roots." McDonald's, which once faced controversy over an "$18 Big Mac set," recently decided to cut the price of combo sets sold in U.S. stores by 15%. According to the Wall Street Journal (WSJ), the company and its U.S. franchisees agreed to price eight popular combo meals at 15% less than the sum of their individual items. Previously, an $18 Big Mac set sold at a U.S. rest stop in 2023 became a hot topic on Reddit, the largest U.S. online community. The head of McDonald's U.S. operations even had to clarify that it was a "special case."

Seemingly trying to turn crisis into opportunity, McDonald's is now highlighting nostalgia-inducing products. They have added a $5 breakfast set and an $8 "Big Mac & McNugget Special," and plan to revive the once-popular "Extra Value Meal" branding. Chris Kempczinski, CEO of McDonald's, emphasized during an earnings call in early July that "combo meals priced well over $10 are negatively affecting customer perception," adding, "We need to fix the menu."

This combo price reduction and product expansion strategy is seen as an effort to alleviate consumers' "price burden" while helping McDonald's reclaim its original image as an "affordable dining destination." WSJ pointed out, "The restaurant industry, especially the fast food sector, is struggling as inflation-weary consumers are visiting less often," and noted, "While McDonald's same-store sales in the U.S. have started to rise again in the most recent quarter, the number of customer visits fell short of expectations."

In fact, consumer behavior is shifting in response to the "Trump era." First, American consumers are turning to "thrifty spending." Sales of private label (PB) products and multi-pack items at large retailers are increasing, while sales at upscale restaurants are declining. Executives from Mexican restaurant chain Chipotle, supermarket Kroger, and consumer goods company Procter & Gamble (P&G) all agreed that consumer sentiment has weakened. Beef prices are at all-time highs, and Brazil's 50% tariff has led to higher coffee prices. According to Bloomberg, JM Smucker, which operates brands like Folgers Coffee and Cafe Bustelo, announced plans to raise coffee prices again in early winter. The company already raised prices in May and August, meaning there will have been three price hikes just this year.

Of course, the current situation cannot be blamed solely on the Trump administration. Global food prices have risen since the COVID-19 pandemic swept the world in 2020. Although lockdowns have been lifted, the impact of supply chain disruptions has lasted for more than five years. According to Axios, U.S. grocery prices in 2024 are up 23.6% compared to 2020. This outpaces the overall inflation rate of 21.2% during the same period by 2.4 percentage points. Considering that Korea's Consumer Price Index stood at 116.52 in July, up 16.52% from 2020 (when it was 100), U.S. prices have risen more sharply than those in Korea.

The 'Shadow of Tariffs' Looms Over the Food Industry

The concern now is that the tariff bills will start to be fully reflected in food prices at the table this quarter. According to the UK’s Financial Times (FT), the U.S. food industry, which relies heavily on imports, is lobbying President Donald Trump for tariff exemptions on certain items. The main items they are requesting exemptions for are seafood, vegetables, and fruits. Gavin Gibbons, Chief Strategy Officer of the National Fisheries Institute (NFI), a seafood trade association, said, "Seafood is fundamentally different from other foods," adding, "We want an exemption for all seafood."

In the case of seafood, 85% of U.S. consumption is imported. For example, the U.S. imports 90% of its total shrimp consumption, with one-third coming from India. If President Donald Trump imposes a 50% tariff on India for purchasing Russian crude oil, shrimp prices could become unaffordable. Domestic catch has already reached the maximum sustainable yield and cannot be increased, and regulations make it difficult to expand aquaculture. In fact, according to the Department of Commerce, the U.S. seafood trade deficit reached $24 billion (about 33 trillion won) in 2022.

Rebecca Adcock, Vice President of Government Affairs at the International Fresh Produce Association (IFPA), an agricultural trade group, said, "We are asking for fruits and vegetables to be excluded from tariff discussions." The U.S. imports $36 billion (about 50 trillion won) worth of fruits and vegetables, much of it from Mexico, Peru, and Canada.

The Food Industry Association (FMI), whose members include Walmart and supermarket chain Albertsons, pointed out in a recent report that the share of imported cucumbers has jumped from 35% in 1990 to 90% today. To produce 90% of cucumbers domestically would require year-round greenhouse cultivation, inevitably driving up costs. Andy Harig, Vice President at FMI, emphasized, "Tariffs are designed to raise prices," adding, "Some tariffs are significant enough to result in noticeable price increases."

The National Restaurant Association (NRA) also sent a letter last month to Jamieson Greer, the U.S. Trade Representative, warning that "if tariffs are imposed on fresh ingredients that are only produced seasonally in the U.S., food prices will surge," and stating, "Food and beverage products are not categories where the U.S. runs a large deficit, so we hope they will be exempt from tariffs." However, FT noted that since there is no separate application process for tariff reductions, such exemptions may be difficult to obtain according to legal experts.