Yesterday was Canadian Thanksgiving, and for many of us, that meant pumpkin pie. But the question is, did you make it or buy it? There is no right answer, but there is the question of whether you can make a pumpkin pie for as little as you can buy one at COSTCO. In Canada, the Costco pumpkin pie typically sells for around $6.99 CAD, assuming you have a membership to Costco, and you do not count the cost of this membership towards the cost of your pie, boy is that a hard price to beat!
That means for a 12-inch pie, roughly 58 oz (3.6lbs/1.6 kg), you get a whole lot of pie. When you break this down by other purchases of convivence pies, you are unlikely to find the same deal. Superstores Farmer’s Market pie is 10 inches and costs $7.50 for only 900g, whereas Walmart’s “Your Fresh Market” pumpkin pie slightly undercuts Loblaw’s franchise at $7.47. Costco is selling their pies at $0.43/100 g, while its competitors at non-seasonal sales are selling them at $0.83/100g ($0.77/100g when on sale). Costco knows how to entice its customers around the fall season to get them in the door, such a discount on the pie is a disincentive to make it yourself.
Could you make a pumpkin pie for $7?
It all depends on how you source your ingredients and value your time. For simplicity, let’s assume you do not grow your food-grade pumpkins and make your puree. If you did, we would have to account for your time and resources put into growing that pumpkin. So for now, let’s estimate the cost based on making Simple Pumpkin Pie from allrecipes.com and you buy all your ingredients.
While you could easily make a quick pie shell, you could probably buy it cheaper and save a few dishes. So instead of mixing up a cup and a half of flour ($1.25) and a cup of shortening ($1.88), you opt for the frozen 9-inch pie crust (regular price $4.79/2 shells), saving yourself $0.74 and time. Next, you pull out 2 eggs from the fridge, which is roughly $0.33/egg, plus 1 teaspoon of pumpkin pie spice, which we will say is 2.6g of cinnamon, spice, and everything nice, costing an extra $0.26. Lastly, you have lucked out and got both a 14 oz can of condensed milk and a 16 oz can of pumpkin puree on sale for a steal of $2.69 and $4.99. Not counting your time, because you enjoy making a pie for your loved ones to enjoy, that 9-in pie costs you only $11.00 CAD, a third more than buying one directly from Loblaws or your local grocery store.
How can Costco do it?
First, it is economies of scale. Costco is making thousands of pies a day, so they have been able to cut down on the costs. They also are not sourcing one can of puree at a time or eggs by the dozen. Instead, they are purchasing in large volumes which reduces their raw material costs. Costco doesn’t only sell in bulk; they buy their ingredients in bulk. The franchise also employs operational efficiencies in production; by producing large batches in Costco’s in-store bakeries, they streamline production and reduce labour costs. The simple packaging and standardized recipe further contribute to cost control, allowing the company to keep prices low despite rising costs of labour and materials.
Their pumpkin pie is not year-round, it’s limited to the fall season between Thanksgiving and Christmas, which is its peak demand season, therefore ensuring they are capitalizing on their customer’s demand. The high demand for pumpkin pies during these periods allows Costco to keep per-unit costs low, with production scaling up to meet the seasonal spike in demand. The volume of pies sold compensates for the low margin, generating significant revenue. If they were to try to sell the pies in the spring for the same price, they likely would find their demand too low to turn a profit.
It's not all about the price when it comes to pie
Costco isn’t a big advertiser when it comes to its stores. Since they use the membership model, their clientele is often loyal, and costly advertising budgets are not needed. For the pumpkin pies, they don’t need to, word travels fast, and even faster thanks to social media keeping us posted on when fresh pies are rolling out, and the lineup to buy them. They practically sell themselves.
There is speculation that Costco will take a loss on their pies. Now, I cannot confirm that, but it also wouldn’t be a huge loss. If Costco takes a loss on the pie, they are likely going to make it up with a complementary good. It’s kind of like getting a printer for cheap because you are going to keep buying expensive ink. For the bulk store, the pies bring the customers in, and while you are there, you wander around the store, and pick up whipped cream, maybe you need the turkey and potatoes also for your feast. You make additional purchases along the way to the checkout, and while you came for the great value of the pie, you have helped boost memberships and other higher-margin items for the store.
There is no shame in buying your pie and enjoying it too
So maybe Costco is getting you in the door with a sensational price which will just cost you more as you continue through the store, but that’s life. Sure, you could make the pie, there is nothing wrong with that either, whether it’s made with love or comes in a box, it is likely helping support local producers. You are either buying pumpkin puree, eggs, sugar, flour, and whipped cream which is sourced from a Canadian producer, or Costco is doing that on your behalf, supporting local producers. What matters, is not whether you make or buy the pie, it is that you enjoy it, and as you do so, you are helping celebrate the bounty of our agriculture here in Canada.
