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

Ladysmith storyteller chosen for TD Canadian Children’s Book Week

Ladysmith oral story teller Rachel Dunstan Muller recently returned from a tour of northern Quebec.

Cowichan Valley Regional District’s affordable-housing strategy moves forward

Board signs three-year financial agreement for initiatives

North Cowichan council denies rezoning bid for cannabis outlet in Chemainus

Site on Chemainus Road deemed too close to spaces frequented by youth

Get ready to hit the links in support of the Ladysmith Chamber of Commerce

The Ladysmith Chamber of Commerce is preparing for their 12th Annual Golf Classic.

New book from Nanaimo Historian details social history of the E&N railway

Along the E&N tells the story of 32 establishments from Esquimalt to Campbell River.

Rescuers finally persuade Eiffel Tower climber to come down

The official said the man was ‘under control and out of danger’ on Monday night

B.C. sends 267 firefighters to help battle Alberta wildfires

Out of control fires have forced evacuations in the province

LETTER: Fletcher ‘blurs reality’ on B.C. union public construction

Bridge, highway projects awarded to companies, not unions

Killer of Calgary mother, daughter gets no parole for 50 years

A jury found Edward Downey guilty last year in the deaths of Sara Baillie, 34, and five-year-old Taliyah Marsman

Federal government funds millions to help B.C. police spot drugged driving

Many police departments have expressed wariness about using the only government-approved roadside test

Judge: Mississippi 6-week abortion ban ‘smacks of defiance’

The new law would prohibit most abortions once a fetal heartbeat can be detected

Oil companies, 24-cent gap between B.C., Alberta to be focus of gas price probe

Premier John Horgan called the spike in gas prices ‘alarming’

Motorcycle deaths spike 50% since 2017

Riders were most likely fatally crash on the weekends compared with the rest of the week

Mother of accused charged in death of Surrey teen girl found in torched SUV

Manjit Kaur Deo charged with ‘accessory after the fact’ in 2017 death of Surrey teen

Most Read