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

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

Fruit farmers in the Okanagan and Creston valleys are in desperate need of cherry harvesters amid COVID-19 work shortages. (Photo: Unsplash/Abigail Miller)
‘Desperate’ need for workers at Okanagan cherry farms

Fruit farmers are worried they’ll have to abandon crops due to COVID-19 work shortages

A tent housing a mobile vaccination clinic. (Interior Health/Contributed)
Over 5K jabbed at Interior Health mobile COVID-19 vaccine clinics

The clinics have made stops in more than 40 communities since launching last week

Provincial Health Officer Dr. Bonnie Henry talks about B.C.’s plan to restart the province during a press conference at Legislature in Victoria, Tuesday, May 25, 2021. THE CANADIAN PRESS/Chad Hipolito
Interior Health COVID-19 cases falling slower than the rest of B.C.

More than a third of provincial cases announced Thursday came from the Interior

The Greater Vernon Chamber of Commerce will host the Valley Wide Business Expo May 4 at Predator Ridge Resort. (photo submitted)
Golf raffle helps Okanagan families score homes

Habitat for Humanity Okanagan swinging into action this summer with a new raffle

The weekly COVID-19 map for June 6 to 12. (BC CDC)
South Okanagan sees only 5 new cases in last week

The Similkameen Valley went a second week without any new cases

Marco Mendicino, Minister of Immigration, Refugees and Citizenship during a press conference in Ottawa on Thursday, May 13, 2021. THE CANADIAN PRESS/Sean Kilpatrick
Canada to welcome 45,000 refugees this year, says immigration minister

Canada plans to increase persons admitted from 23,500 to 45,000 and expedite permanent residency applications

Emily Steele holds up a collage of her son, 16-year-old Elijah-Iain Beauregard who was stabbed and killed in June 2019, outside of Kelowna Law Courts on June 18. (Aaron Hemens/Capital News)
Kelowna woman who fatally stabbed Eli Beauregard facing up to 1.5 years of jail time

Her jail sentence would be followed by an additional one to 1.5 years of supervision

Cpl. Scott MacLeod and Police Service Dog Jago. Jago was killed in the line of duty on Thursday, June 17. (RCMP)
Abbotsford police, RCMP grieve 4-year-old service dog killed in line of duty

Jago killed by armed suspect during ‘high-risk’ incident in Alberta

The George Road wildfire near Lytton, B.C., has grown to 250 hectares. (BC Wildfire Service)
B.C. drone sighting halts helicopters fighting 250 hectares of wildfire

‘If a drone collides with firefighting aircraft the consequences could be deadly,’ says BC Wildfire Service

A dose of the Pfizer-BioNTech COVID-19 vaccine is pictured at a vaccination site in Vancouver Thursday, March 11, 2021. THE CANADIAN PRESS/Jonathan Hayward
NACI advice to mix vaccines gets varied reaction from AstraZeneca double-dosers

NACI recommends an mRNA vaccine for all Canadians receiving a second dose of a COVID-19 vaccine

A aerial view shows the debris going into Quesnel Lake caused by a tailings pond breach near the town of Likely, B.C., Tuesday, Aug. 5, 2014. THE CANADIAN PRESS/Jonathan Hayward
Updated tailings code after Mount Polley an improvement: B.C. mines auditor

British Columbia’s chief auditor of mines has found changes to the province’s requirements for tailings storage facilities

Starting in 2022, the Columbia Shuswap Regional District is extending dog control to the entire Electoral Area D. (Stock photo)
Dog control bylaw passes in Shuswap area despite ‘threatening’ emails

CSRD board extending full dog control in Electoral Area D starting next year

A North Vancouver man was arrested Friday and three police officers were injured after a 10-person broke out at English Bay on June 19, 2021. (Youtube/Screen grab)
Man arrested, 3 police injured during 10-person brawl at Vancouver beach

The arrest was captured on video by bystanders, many of whom heckled the officers as they struggled with the handcuffed man

Most Read