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.

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

Just Posted

B.C. Finance Minister Selina Robinson outlines the province’s three-year budget in Victoria, April 20, 2021. (B.C. government video)
B.C. deficit to grow by $19 billion for COVID-19 recovery spending

Pandemic-year deficit $5 billion lower than forecast

Co-ordinator/founder David Clarke, right, is pictured with members of Comox Valley Street Outreach during Monday’s rig dig. Scott Stanfield photo
Comox Valley group aims to stop overdose deaths, reduce stigma

As the overdose crisis worsens throughout B.C., a local advocacy group is… Continue reading

London Drugs now taking COVID-19 bookings. Screenshot, London Drugs
Courtenay London Drugs now taking COVID-19 bookings

A number of locations in Western Canada selected to give vaccine

A wildfire has started near Gold River, and B.C. Wildfire Service crews are on scene. Photo courtesy Coastal Fire Centre
Wildfire burning in remote area near Gold River

Coastal Fire Centre investigating cause, but confirms it is human-caused

Volunteers paint the famous Denman Island Graffiti Fence with messages for Earth Week. Photo by Danni Crenna
Denman Island celebrates Earth Week

The Denman Island Climate Action Network (DICAN) has kicked off Earth Week… Continue reading

FILE – NDP Leader John Horgan, right, and local candidate Mike Farnworth greet one another with an elbow bump during a campaign stop in Coquitlam, B.C., on Friday, September 25, 2020. THE CANADIAN PRESS/Darryl Dyck
B.C. won’t be using random individual road stops to enforce travel rules: Safety Minister

Minister Mike Farnworth says travel checks only being considered at major highway junctions, ferry ports

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
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

The following is a list of restaurants offering take-out and patio dining. ADOBE STOCK IMAGE
List of Comox Valley restaurants offering take-out, patio dining options

Restaurants in the Comox Valley continue to adapt to government-imposed restrictions in… Continue reading

A man pauses at a coffin after carrying it during a memorial march to remember victims of overdose deaths in Vancouver. THE CANADIAN PRESS/Darryl Dyck
B.C. announces historic half-billion-dollar funding for overdose crisis, mental health

Of it, $152 million will be used to address the opioid crisis and see the creation of 195 new substance use treatment beds

Children’s backpacks and shoes are seen at a CEFA (Core Education and Fine Arts) Early Learning daycare franchise, in Langley, B.C., on Tuesday May 29, 2018. THE CANADIAN PRESS/Darryl Dyck
B.C. budget to expand $10-a-day child care, but misses the mark on ‘truly universal’ system

$111 million will be used to fund 3,750 new $10-a-day spaces though 75 additional ChildCareBC universal prototype sites over the next three years.

Mak Parhar speaks at an anti-mask rally outside the Vancouver Art Gallery on Sunday, Nov. 1, 2020. Parhar was arrested on Nov. 2 and charged with allegedly violating the Quarantine Act after returning from a Flat Earth conference held in Geenville, South Carolina on Oct. 24. (Flat Earth Focker/YouTube.com screenshot)
Judge tosses lawsuit of B.C. COVID-denier who broke quarantine after Flat Earth conference

Mak Parhar accused gov, police of trespass, malfeasance, extortion, terrorism, kidnapping and fraud

Ambulance paramedic in full protective gear works outside Lion’s Gate Hospital, March 23, 2020. Hospitals are seeing record numbers of COVID-19 patients more than a year into the pandemic. (The Canadian Press)
B.C.’s COVID-19 infection rate declines, 849 cases Tuesday

Up to 456 people now in hospital, 148 in intensive care

Most Read