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Friday, August 30, 2013

Why is Cake so Expensive When Cake Mix is so Cheap?

Buying a Cake is Expensive!

I was really wanting some cake the other day and decided to check out some cakes at the grocery store.  They had some really nice looking decorated cakes, but they were expensive!

Following are prices I found in the bakery for simple frosted cakes:

  • 7 inch round cake for $11.99
  • 1/8 sheet cake for $12.99
  • 1/4 sheet cake (9 in x 13 in) for $17.99
  • "cupcake" cake with 30 cupcakes for $27.00
  • 1/2 sheet cake (12 in x 16 in) for $30.99

Decorated cakes for sale at a bakery- expensive!
Image source: Dr. Penny Pincher

Near the checkout, they had single pieces of frosted cake for sale in individual clear plastic boxes for $2.50.  Yes, $2.50 for one piece of cake!

Since I was at the grocery store, I decided to see how much it would cost to make a cake using cake mix, eggs, and oil and top it with frosting.

How Much does it Cost to Make a Cake?

Here are the raw ingredients in the typical sizes sold at the grocery store:
Eggs $1.45/dozen
Vegetable oil $2.59 for 24 oz
Cake mix $1.28 for 15.25 oz (makes 9 in x 13 in cake)
Frosting $1.77 for 16 oz
Dec-a-cake icing $2.29 for 4.25 oz tube

Pillsbury cake mix- on sale cheap
Image source: Dr. Penny Pincher

Things you probably already have at home to bake a cake:
Cake pan $5.99 for 9 in x 13 in
Nonstick spray $2.49 for 5 oz can

Cost of cake ingredients: $1.78
Cake mix $1.28
1 cup water -less than one cent if you use tap water
1/3 cup oil $2.59/18= $0.14
3 eggs $1.45/4=$0.36

Cost of energy for baking a cake: $0.13
Let's consider the cost of energy to bake a cake in the oven at 350 degrees for 34 to 38 minutes.

It takes 2 kilowatt-hours (kW-h) of electricity to run an oven at 350 degrees for one hour.  At 10 cents per kW-h, this is 20 cents of electricity cost per hour to run an oven.  Since the cake only takes 38 minutes the cost of energy to bake a cake is 38/60 x 20 cents= $0.13.

Cost of frosting and cake decorations: $4.06
Frosting and cake decoration cost can vary depending on how much you want to decorate your cake.  Let's include 16oz of frosting and one tube of decoration icing.

Betty Crocker cake frosting- whipped
Image source: Dr. Penny Pincher

Dec-a-cake cake frosting tubes
Image source: Dr. Penny Pincher

The actual cost of making a 1/4 sheet decorated cake at home is: $5.97
This compares with a typical bakery or grocery store price of $17.99.  Your saving is $12.02 by making cake at home rather than buying a cake at a store.

The cost of $5.97 to make a 1/4 sheet decorated cake at home includes all cake ingredients plus frosting and the energy to bake the cake.  If you don't have a cake pan, you will need to buy one, but it is reusable for many years.  You could save money by not buying the Dec-a-cake frosting and using food coloring to make your own colored frosting for decoration.

Why are Cakes so Expensive at the Store?

So my choice between buying a cake at the store and making a cake at home was an easy one!  But why does it cost so much to buy a cake at the store when it is so cheap to make a cake at home?

Ingredient cost?  Bakeries can get ingredients at lower cost than I can since they buy in large quantities, so it can't be ingredient cost.

Labor cost?  I have watched the people working in the bakery- they can frost a sheet cake in a couple minutes, so it can't be labor cost.

I think the reason cakes cost so much comes down to logistics.  It is inexpensive to transport and store the raw ingredients for a cake, but once you bake and decorate a cake it gets expensive.  A decorated cake takes up a lot of space and you have to handle it carefully to avoid damaging it and making it worthless.  The cakes at the bakery I visited were refrigerated, adding to the cost.  Cakes have a limited shelf life of a few days once they are baked- there is risk that cakes will not be sold in time and will get thrown away, also adding to the cost.

Another reason cakes are so expensive- demand.   People are willing to pay for the convenience of picking up a completed cake.  This can be very handy.  You can pick up a birthday cake on the way home from work.  It takes at least an hour to bake a cake from start to finish if you allow the cake to cool before frosting it.  I have even used the shortcut of placing a baked cake in the freezer to cool it off faster.  If you frost a hot cake, the frosting melts and the cake can get torn up, making a mess.

You can order customized cakes, which is also worth the money to some people.  You can get custom designs and edible overlays that you probably couldn't make yourself at home very well.  If you have a kid that is really into Smurfs, you might want to buy them a really slick looking Smurfs cake rather than making a homemade cake and trying to draw a smurf with blue frosting yourself. I don't really care what a cake looks like, as long as it has plenty of frosting.  The rest of my family likes plain cake with no frosting- so that is even easier.  Homemade cakes are the way to go for me.

Elaborately decorated Smurfs cake
Smurfs cake- it would be hard to make a cake like this at home!
Image source: Dr. Penny Pincher

Another reason people would spend lots of money buying cakes from a bakery is if they are serving a lot of people at an event like a graduation party or a wedding.  It is easy enough to make one 9 in x 13 in cake in your kitchen- this should serve 16 people with 2 in x 3 in pieces.  But if you want cake for 100 people, you could spend a lot of time and tie up your oven for a long time baking cakes.  Plus you will need to store the cakes somewhere if you bake them yourself in advance of your event.  If you order cakes from a bakery, they can be delivered all at once at the desired time and location which is really convenient.

Penny Pinching Tips
  • Make your own cake at home for under $6 and save $12 on a 1/4 sheet cake
  • Shop around to find the best deal from bakeries if you are buying large quantities of cake for an event

Recommended Reading
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