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

Heavy turnout at advance poll in Chilliwack

Some voters waited as long as two hours

Around the BCHL: Youth trumps experience for Chilliwack and Salmon Arm

Around the BCHL is a look at goings-on in the BCHL and the junior A world.

Retirement of Chuck Stam brought out kind words and fond goodbyes

Tuesday was the last council meeting for a councillor who has served Chilliwack for almost 20 years

Chilliwack City Watch member helps RCMP catch drunk driver

Volunteer flagged down officer after watching vehicle driving erratically on Yale Road

Indigenous Bloom the only dispensary operating in Chilliwack with the dawn of legalization

Ashwell Drive storefront is on Kwaw-Kwaw-A-Pilt First Nation land operating under a new ‘cannabis law’

Mellow opening to B.C.’s only legal pot shop

About five people lined up early for the opening of the BC Cannabis Store in Kamloops.

Money Monitor: Should you switch to a fixed-rate mortgage?

BMO’s Omar Abouzaher outlines the pros and cons of both types of mortgages

Earth still moving in Old Fort, B.C., but not above homes: geologists

Transportation Ministry crews are ready to start work on the Old Fort road

Pedestrian hit and killed in Vancouver

Police said in a statement that the man was crossing mid-block near Ross Street on SE Marine Drive just after 6 a.m

Around the BCHL: Youth trumps experience for Chilliwack and Salmon Arm

Around the BCHL is a look at goings-on in the BCHL and the junior A world.

Support high for Metro Vancouver SkyTrain, light rail projects: poll

Nearly 90 per cent were in favour of a UBC SkyTrain extension

Proportional representation grows government, B.C. study finds

Spending, deficits higher in countries where voting system used

Black market will thrive until small pot growers and sellers included: advocates

Advocates say the black market will continue to thrive until small retail shops and craft growers are included in the regime.

Goodbye cable, hello Netflix: 1/3 of Canadians cut the cord

Just under half of households no longer have a landline phone

Most Read