'Sobeys, do better': Lemon cake for $54.99 sparks question – how do grocery stores set these prices, anyway?

An Ontario shopper spotted such a high-priced dessert - he thought it was a typo: Turns out, it wasn't

Tammy's Homemade Treats Frozen GF Lemon Cake is sold for $54.99 at Sobeys (@carmilevy/Twitter) (Photo courtesy of @carmilevy/Twitter)

The impact of inflation on food continue to be hard to stomach for Canadians who are struggling at the grocery store.

Photos shared on social media showing the shocking price of certain items at the grocery store are becoming increasingly common and have left many wondering how pricing food items is determined.

A recent example of this shows a pre-packaged frozen lemon cake, which was being sold at a Sobey’s in Thornhill, Ontario, for $54.99. Shopper Carmi Levy, who nabbed the photo, double-checked with in-store staff who confirmed that there was no typo. Other friends in the area also mentioned the cake had been sold for a number of years.

The "Tammy's Homemade Treats Frozen Lemon Cake" was found as part of a Kosher for Passover display section, and did not appear to have been made in-house. Yahoo News Canada has reached out to Sobeys for a comment on the pricing.

How do grocery stores decide prices?

David Soberman is a professor of marketing at the University of Toronto’s Rotman School of Management. He says that supermarkets or any retailer has the right to charge almost any price for anything - with exceptions on certain items, like pharmaceuticals and alcoholic beverages. However, if the prices they charge are above the market or what the market is willing to accept, there will be a reaction from customers.

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“(Supermarkets) have a lot of flexibility of what they can do, so really what determines what they should do, is how people will react,” he tells Yahoo News Canada.

Where grocery stores are constrained is with items that are easily comparable, like milk or eggs. However, on specialty items that can’t easily be found at other grocery stores, there is a lot more flexibility to charge higher prices.

If there’s something like a cake, it might have taken a lot more work and a lot more speciality ingredients to make that cake then the standard cakes that you might find in the bakery section of a store Things that are more unique tend to cost more to produce.David Soberman, Professor of Marketing, University of Toronto’s Rotman School of Management

Soberman adds that a store won’t carry specialty items unless they can make money off of it, so it’s worth considering how unique the item is and how likely are you to find something comparable in other stores.

“If it’s a specialty cake that’s being made differently and it’s the only one in the store, it might be justified,” he says. “I’m going to compare this to what I’m going to find at (a high-end grocery store) and you might find a number of cakes priced similarly. What’s the actual basis of comparison?”

While Soberman can’t comment on the specific item of frozen cake, he says while supermarkets typically sell mass-produced items, they also have incentive to pick up business from custom, high priced segments occasionally.

“You may see things that don’t necessarily fit but they’re probably targeted to a different kind of customer,” he says.