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.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Smokey Port painted by D.F. Gray during the eighth annual Paint Out. (SUBMITTED PHOTO)
Port Alberni’s DRAW Gallery celebrates art online and in person

Fall in Love With Art! exhibit runs until Nov. 27

Mount Arrowsmith rises over the City of Port Alberni in its late summer splendour. (SUSAN QUINN/ Alberni Valley News)
More funding available through Alberni Valley Community Foundation

$30K available for charities responding to COVID-19; deadline is Oct. 30

Alberni District Secondary School principal Rob Souther, ADSS Breakfast Club Coordinator Melody Burton, Andrew Johns and employees William Dorr and Erika Salvino celebrate Johns’ donation of $5,000 to the breakfast club. (SONJA DRINKWATER/ Special to the AV News)
SCENE AND HEARD: Feeding Alberni Valley residents one dollar at a time

Local organizations benefit from charitable donations

FILE – Provincial health officer Dr. Bonnie Henry answers questions during a press conference to update on the province’s fall pandemic preparedness plan from the press theatre at Legislature in Victoria, Wednesday, Sept. 9, 2020. THE CANADIAN PRESS/Chad Hipolito
B.C. sees record-breaking daily COVID infections with 499 new cases over weekend

Two people, both in the Lower Mainland, died due to the virus over the weekend

A passer-by walks past a COVID-19 testing clinic in Montreal, Friday, Oct. 16, 2020. THE CANADIAN PRESS/Ryan Remiorz
Canada ‘yet to see’ deaths due to recent COVID surge as cases hit 200,000

Much of the increase in case numbers can be attributed to Ontario and Quebec

Police confirm human remains were found in a recycling bin in Vancouver on Oct. 18, 2020. (Black Press Media file photo)
Human remains found in recycling bin floating near Vancouver beach

Police asking nearby residents to see if their recycling bin has gone missing

Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

(File photo)
RCMP: Two men face charges in reported Parksville fatal hit-and-run

Investigation into man’s death began in August of 2019

B.C. Liberal leader Andrew Wilkinson visits a North Vancouver daycare to announce his party’s election promises for child care, Oct. 9, 2020. (B.C. Liberal Party video)
B.C. parties pitch costly child care programs in pandemic

B.C. Liberals say they’ll deliver on NDP’s $10-a-day promise for lower-income families

A B.C. man decided to create a website to help people find family doctors accepting patients. Because Victoria is considered high-demand, clinic openings can’t be posted publicly. (Unsplash)
Vancouver Island man starts website that connects B.C. residents with doctors

Nanaimo man started project to help people find family physicians accepting patients

Most Read