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

Mainroad North Island ready to prepare region’s highways for winter

New equipment, processes designed to meet all governments specifications

Plant a tree; save the estuary – TD Tree Day looking for volunteers

Greenways Land Trust supports TD in its target of planting 1 million trees by 2030

New warning siren sound on the Campbell River tested

This week BC Hydro’s new public warning system for the John Hart… Continue reading

Three strong earthquakes reported off Vancouver Island

The quakes, all measuring more than 6.0 on the richter scale, were about 260 kilometres west of Tofino

Eddy reflects on her first Campbell River school trustee campaign

‘I knew that SOGI would be an issue, but I didn’t realize that it would be the only issue’

B.C. sailor surprised by humpback whale playing under her boat

Jodi Klahm-Kozicki said the experience was ‘magical’ near Denman Island

B.C. town’s mayoral race a tie, come down to luck of the draw

Harry Gough led incumbent Cindy Fortin by one vote on election night Saturday

Outdoor retailer MEC vows to boost diversity after online complaint

Mountain Equipment Co-op was criticized for perpetuating a white-only picture of the outdoors

Trump vilifies caravan, says he’ll cut Central American aid

Despite Mexican efforts to stop them at the Guatemala-Mexico border, about 5,000 Central American migrants resumed their advance toward the U.S. border Sunday in southern Mexico.

Federal carbon tax rebates will exceed the cost for most people affected

Officials say 70 per cent of people in those provinces will get back more than they end up paying out as fuel costs rise to incorporate the carbon tax.

Rotating strike in Toronto will have ‘significant impact,’ says Canada Post

Canada Post union announces rotating strikes in four Canadian cities.

Cancelling Saudi Arabia arms deal would cost $1 billion: Trudeau

Canada has added its voice to global calls for answers, with Trudeau telling the CBC in an interview today that the Saudi government’s explanation of what happened lacks credibility.

Former B.C. sheriff caught in sex-related sting pleads guilty to lesser charge

Kevin Johnston will be sentenced on Nov. 6 for his role in communicating online with a person posing as a 14-year-old girl.

WWE star Roman Reigns announces he has leukemia

Grappler formerly played in CFL

Most Read