Costco’s Caramel Churro Sundae Risks Alienating Loyal Shoppers with Premium Pricing and Smaller Portions

Costco has finally answered the call to bring back its beloved churros. But if you're expecting the simple, $0.99 pastry that defined its food court for decades, you're in for a surprise. The retailer has launched a $2.99 Caramel Churro Sundae topped with mini churro bites, not the original full-size treat. The classic churros themselves were discontinued in early 2024, a move that disappointed loyal customers and sparked online lamentations.

This isn't a straightforward return. The new sundae is a more elaborate, higher-priced item that costs nearly triple the original 99-cent price. Shoppers are split. Some are excited to try it, while others see it as a slap in the face, demanding the real churros back. The emotional reaction is telling: one parent noted their child's repeated outburst of "Why did they get rid of the churros!?" It was, for him, a "first great betrayal of life."

The central question is whether this is a positive brand move or a profit-driven shift away from simple value. By repackaging the churro flavor into a premium sundae, Costco is likely boosting the per-item margin. Yet it risks alienating customers who loved the churro for its no-frills, affordable indulgence. This mirrors a broader trend in the warehouse club rivalry, as Sam's Club recently introduced its own limited-time Caramel Palmier Sundae, showing both chains are betting on seasonal, higher-margin desserts to draw crowds.

The Real-World Utility Test

The original churro was a classic utility item. It was simple, satisfying, and a perfect, affordable indulgence for a quick break. For decades, that $0.99 churro was a staple, a reliable treat that defined the food court experience. It wasn't about gourmet flair; it was about delivering a consistent, no-frills pleasure for a dollar.

The new Caramel Churro Sundae flips that script. It's a smaller, more elaborate item with a $2.99 price tag that nearly triples the original. In practice, it's a different product altogether-a premium dessert versus a low-cost snack. The change is telling. Costco is likely boosting the per-item margin, but it's sacrificing the real-world utility that made the churro popular. A customer looking for that familiar, larger, cheaper treat now gets a bite-sized, higher-priced alternative. It's a classic trade: profit for perceived value.

This isn't an isolated move. It mirrors the return of the $6.99 Combo Calzone, which replaced the beloved but cheaper Combo Pizza. Both are higher-priced, smaller versions of former staples. The pattern suggests a deliberate shift. Costco is betting that customers will pay more for a seasonal, premium dessert or a calzone that looks impressive, even if it doesn't quite satisfy the craving for the original, simpler item. The utility has been recalibrated from "filling the gap" to "justifying a higher price."

The bottom line is a tension between brand loyalty and profit. The original churro was a product people loved for its quality and value. The new sundae is a product designed for a different purpose-likely higher margins. For now, the emotional backlash shows the brand still owes its customers something. When a staple is replaced with a smaller, more expensive version, the customer isn't just paying more; they're losing a piece of the experience they counted on.

Brand Loyalty and the Membership Moat

The real risk here isn't just about a pastry. It's about the core promise of a membership club. Items like the $1.50 hot dog and soda combo are more than food; they're emotional touchstones. They build a feeling of shared value and reliability. When a staple disappears, it chips away at that feeling. The backlash over the churro and the Combo Calzone shows members aren't just buying a product-they're defending a relationship.

Costco's entire model relies on that relationship. The membership fee is a bet on long-term value. Every time a beloved, affordable item is replaced with a smaller, higher-priced alternative, the brand's moat faces a test. The question for members becomes: "Is the value still there?" If the answer starts to lean negative, the loyalty that keeps people paying for a membership can erode. This isn't just about one dessert; it's about the cumulative perception of what the club stands for.

The trade-off is clear. Focusing on smaller, premium desserts like the Caramel Churro Sundae might boost the per-visit revenue from the food court. But it may not drive more people through the doors. In fact, it could do the opposite. If the core value proposition-the simple, satisfying, affordable treats-feels like it's being stripped away, it could make the membership feel less essential. The goal should be to strengthen the moat, not narrow it.

The bottom line is that brand strength is built on consistency and trust. Costco has a powerful brand, but it's a brand built on delivering a certain kind of value. When you replace a $0.99 churro with a $2.99 sundae, you're not just changing a menu item. You're asking customers to re-evaluate the entire experience. For a membership-based model, that's a risky calculation.

Catalysts and What to Watch

The real test for Costco's churro comeback-and the broader menu shift-is what happens next. The first forward-looking signal is the duration of the new Caramel Churro Sundae. If it's a limited-time seasonal item, it's likely a one-off experiment. But if it sticks around, that signals a trend: a move toward smaller, premium desserts to boost per-visit revenue. The fact that Sam's Club just launched a remarkably similar Caramel Palmier Sundae suggests this is a coordinated, competitive play, not a fluke.

Watch the chatter. The immediate backlash on social media is a clear early warning. A comment with nearly 5,000 likes demanding the whole churros back shows deep brand loyalty is at stake. Monitor if this sentiment cools or intensifies over the coming weeks. Positive reactions will signal adaptation; sustained anger will be a red flag for potential brand erosion.

The ultimate metric is the membership moat. Keep an eye on whether these menu changes correlate with shifts in average spend per visit or, more importantly, membership renewal rates. If the food court's premium push drives higher sales without spooking members, the strategy works. But if renewal rates dip or average spend stagnates, it could mean the trade-off-higher prices for smaller, less-loved items-is weakening the very value proposition that keeps people paying for a membership. For now, the churro sundae is a small test. The results will tell you if Costco is recalibrating its brand for profit, or just kicking the tires on a risky new direction.