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

Shuswap River vessel restrictions proposal moves forward

North Okanagan electoral area directors unanimously pass amended notice of motions

Fisheries officials puzzled over missing Shuswap sockeye

Abundance in weekend test fishery in Strait of Georgia much lower than expected

Chase council candidates meet the public at open forum

Five people seek mayor’s chair, six vying for council

Cemetery Tour to feature life and times of Mayor Cyril Thomson

Event returns on Oct. 14 with stories of community’s past.

Shuswap Family Resource and Referral Society celebrates 30 years in new digs

Shuswap Family Centre hosts party at new Marine Park Drive location in Salmon Arm

Secret supper clubs test appetite for cannabis-infused food ahead of legalization

Chefs are eagerly awaiting pot edibles to become legal in Canada

Documentary series investigates missing North Okanagan women

APTN Investigates: Dark Valley airs Oct. 19

Enbridge to begin building road to access pipeline explosion site in B.C.

An explosion Tuesday knocked out a 91-centimetre line

Andrew Scheer on revamped NAFTA deal: ‘I would have signed a better one’

Conservative leader says he wouldn’t have signed USMCA

Matheson will have NHL hearing after Canucks rookie Pettersson hit

The 19-year-old Swedish centre appeared woozy after the hit

GUEST COLUMN: A better way to manage B.C.’s public construction

Claire Trevena responds to Andrew Wilkinson on NDP union policy

B.C. brewery creates bread beer from food waste

The brew aims to raise food waste awareness and provide funds for the food bank

Dad files Charter challenge after B.C. bans kids from taking transit unsupervised

Adrian Crook is taking his fight to B.C. Supreme Court

B.C. VIEWS: Cast your municipal vote for sanity on homelessness

Thousands on waiting list while anti-capitalist bullies get priority

Most Read