Canadian grocers make $3M per year from penny-rounding: UBC study

Ottawa announced plans in 2012 to phase out the copper coin

Grocery stores across the country are cashing in on the demise of the penny, according to a young researcher at the University of British Columbia.

Third-year economics and mathematics student Christina Cheng has written a paper that says Canadian grocers are making $3.27 million per year from penny-rounding.

Ottawa announced plans in 2012 to phase out the copper coin, and as a result, cash purchases are now rounded up or down to the nearest five-cent increment.

Cheng wanted to know whether the change was benefiting shoppers or stores.

“Penny-rounding always becomes a guessing game,” the 19-year-old explained. “It’s a fun guessing game because it might not hurt in the short run, looking at several cents, but in the long run, I wondered if this actually accumulates.”

Curious, she decided to use her spare time outside of class to investigate.

First, Cheng enlisted a friend and they spent about a month and a half documenting more than 18,000 prices at grocery stores, taking pictures of price tags and entering the data into a spreadsheet.

They found that most prices ended in .99 or .98 — numbers that would result in bill totals being rounded up for cash transactions, if tax is not applied.

Cheng took the data and used a computer simulator to create “grocery baskets” with various items. She adjusted different variables such as the numbers of items and amount of taxes, and factored in data from the Bank of Canada on what payment methods consumers are most likely to use.

Cheng said her analysis found that grocery stores are profiting from penny-rounding.

In the end, Canadian consumers don’t end up paying much extra, but the rounding on cash transactions can mean big money for grocery retailers across the country, with each store standing to collect $157 per year, Cheng said.

In October, a paper Cheng wrote on the research won a competition for the best undergraduate student paper at the International Atlantic Economic Society’s conference in Montreal. Her study is slated to be published next June in the Atlantic Economic Journal.

The Retail Council of Canada disagrees with Cheng’s findings, said Karl Littler, the group’s vice president of public affairs.

The study’s methods don’t reflect real grocery baskets or take into account the impacts of various provincial taxes on bill totals, he said, noting that the average grocery bill is $53 and consists of a larger number of items than Cheng’s simulated baskets included.

Littler said the council’s members have reported anecdotally that penny-round is about 50-50, with half of the bill totals being rounded up and benefiting stores, and the other half being rounded down and benefiting consumers.

“There’s no nefarious plan here to scoop pennies,” he said.

Cheng said she isn’t looking to demonize Canada’s grocery industry, and simply wanted to look at an issue that affects most Canadians on a daily basis.

Her work on penny-rounding was all done outside of class time as a labour of love, which Cheng said really surprised her professors.

“Tying research with application is what I love to do,” she said.

Gemma Karstens-Smith, The Canadian Press

Like us on Facebook and follow us on Twitter.

Just Posted

Council briefs: Village of Queen Charlotte

NDIT applications, solar power, animal welfare, and a look ahead to Committee of the Whole

Climate, reconciliation and industry top all candidates agenda in Terrace

Debate was the candidate’s last opportunity to address voters in a public forum

Climate change, economy and reconciliation take centre stage at Oct. 15 All-Candidates Forum

Six of the eight candidates were in attendance at the Smithers event

ELECTION 2019: It’s so close, it could come down to who turns out to vote

Black Press Media’s polling analyst on the origins of predictive seat modelling in Canada

Jack’s Devils beat Quinn’s Canucks 1-0 in NHL brother battle

New Jersey youngster scores first career goal against Vancouver

Two charged after owner’s wild ride through Kamloops in his stolen truck

Crystal Rae Dorrington, 37, and Derrick Ronald Pearson, 32, facing multiple charges

Judge orders credit union’s bank records for Kelowna social worker facing theft allegations

The man is accused of negligence, breach of contract, fraud and a conspiracy with Interior Savings

Leaders pour it on with rallies, boosts for candidates as campaign reaches peak

The federal election campaign has reached a crescendo

Allegations of racism lead to ministry investigation at Vancouver private school

St. George’s School was contacted over what the school describes as ‘deeply offensive behaviour online’

Not a political question: Thunberg calls for climate action in Alberta

Edmonton police estimated the size of the crowd at about 4,000

Zantac, the over-the-counter heartburn drug, pulled in Canada, U.S.

Health Canada also investigates possible carcinogen in some ranitidine drugs

B.C. public safety minister says cannabis edibles not in stores til January

Mike Farnworth says he wants regional issues considered when it comes to licensing

Most Read