Why The Price Of Food At Costco Is Going Up

If you love spending time in the kitchen, you might also appreciate shopping at Costco. A favorite among home cooks for its selection of high-quality, low-priced staple ingredients such as frozen berries, Atlantic salmon, jasmine rice, and nut butters (via Insider), the chain also stocks quite a few of the tools and appliances that come in handy while cooking, such as air fryers, Instant Pots, and Vitamix blenders (via Food52).

While anyone at all can, of course, shop at a Costco location, they do need to have a membership card in hand, as the chain runs on a membership model that's available at two price points: the store's standard Gold Star membership, which costs $60 per year per family, as well as a $120 per year Executive membership, which boasts perks such as annual cashback rewards (via Costco). Over the past few years, even in spite of more recent record inflation and supply chain issues, Costco hasn't raised its membership fees, a fact that created some buzz earlier this year when financial experts speculated that the fees would soon be due for their every five-and-a-half-year price hike (via Kiplinger).

And while the chain hasn't yet increased its membership dues, its food prices have gone up, a development shoppers might be none too pleased with, seeing as how paying an annual membership is supposed to imply access to competitively priced items.

Pandemic times haven't been easy on businesses, with companies across the country facing record inflation and supply chain issues, but Costco is one retailer that actually made gains over the past few years. Last month, when large retailers including Target and Walmart reported substantial first-quarter losses they chalked up to these issues, Costco actually had relatively good news to broadcast: Its past few months of earnings have actually been trending upwards, a development analysts attribute to the chain's membership model.

As explained by The Motley Fool, members who have already shelled out for Costco's relatively modest membership will feel compelled to shop at the store to make the most of their membership, a theory borne out by Costco's Q3 data, which the chain recently shared (via The Motley Fool). According to Bob Nelson, senior VP of finance and investor relations, at the end of Q3 Costco's membership renewal rate was a whopping 92.3%, up 0.3% from Q2. Considering how important Costco's membership fees are to its bottom line, it makes sense that the wholesale giant would want to safeguard those renewal rates by holding off on any predicted membership fee increases.

In Costco's recent Q3 earnings call, Nelson stated that though membership fees are due to be raised, because historically the chain has done so every five to six years and the last price hike was in 2017 (via Kiplinger), Costco is holding off on any changes to membership — for now. "Given the current macro environment, the historically high inflation, and the burden it's having on our members and all consumers in general, we think increasing our membership fee today ahead of our typical timing is not the right time," Nelson said (via The Motley Fool).

But Costco has not been immune to the higher costs of production associated with the inflation and supply chain issues that have affected retailers across the country — and, in this instance, those costs have to be passed on to the consumer. Although the implied tradeoff for paying a membership fee is access to the chain's competitive prices, Costco admitted in that earnings call that the record costs it's facing have resulted in higher prices on some goods.

"I think we always want to be the best value in the marketplace," Nelson stated before admitting that "it's easier for us to pass on higher pricing or higher freight costs or raw material costs" (via The Motley Fool). Notwithstanding, the executive noted, the chain's prices remain lower in comparison to other large retailers. "We're every bit as competitive as we've been."