Food and Health | Retail Practices | Topics

Unit Pricing: How shall I compare thee?

By : Jean-Benoît Nadeau

Customers are struggling with the multiplication of formats, but Canada will not likely oblige merchants to provide unit pricing — as is the practice in Quebec and Australia —any time soon.

For the average shopper, a trip to the grocery store is starting to feel more and more like a math test. Which is more economical, the 2.5-litre bottle of detergent for $7.62 or the 1.5-litre bottle for $4.85? In fact, you need to do the same mental gymnastics in the meat, oil, bread, and pasta sections—everywhere, in fact.

While some clever shoppers will quickly see the first offer is better than the second, not everyone is good with numbers. That’s why major Canadian grocery chains display the “unit price” that makes it easier to compare prices. The unit price label, usually indicated on the shelf, shows that the first bottle costs $3.05 per litre and the second $ 3.23— or 5% more.

According to the study “Unit Pricing: Time for a National Approach?” 91% of Canadian consumers believe that everyone should have access to a unit price label and 96% find it very useful. Those surveyed felt that retailers and governments should ensure that all Canadian consumers have access to an accurate unit price displayed legibly and clearly on a suitably sized label. Without this, consumers have to get out a calculator and do the math themselves. Since not everyone is math savvy, many have to resort to improvised alternative solutions such as “big formats are more economical than small ones” or “prices are always lower at Foodco.”

One Australian study showed that with only minimal training on how to locate and read unit price labels, consumers could reduce their grocery bills by as much as 20%. Low-income consumers would especially benefit from this practice.

The Australian consumer organizations and governments appear to be the most engaged in studying and implementing effective UP programs but we did not opine on which country has the best system.”

Jay Jackson, author of the Consumers Council of Canada study

It is in fact rare for a country to apply a single system: most use a combination of several.

Massachusetts and other New England states were the first to introduce unit price regulations—in the early 1970s. Several retailers had already begun to do so on their own initiative as a way of gaining loyalty from customers struggling with the multiplication of formats and the challenges of metric conversion.

Several countries have decided to create rules to enforce unit pricing. Australia has the most extensive and stringent among them. Since 2009, the Australian Competition and Consumer Commission (ACCC) has regulated unit prices under the supervision of the country’s principal consumer organizations and of its academic community, which closely monitors and analyzes consumer behavior.

Rules are much less systematic elsewhere. In 1998, the EU issued a directive that required both the selling price and unit price to be displayed. Although the directive is binding, each member State is free to adapt its practices to the local population.

The approach in the US is more fragmented. The US has a national standard, but it is not mandatory. The American Institute of Standards and Technology (NIST) created standardized best practices guidelines to help retailers who opt into the voluntary system. A total of 21 States and Territories have adopted unit price regulations, and in 11 of those (Connecticut, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Oregon, Rhode Island, Vermont, Puerto Rico and Virgin Islands) compliance is mandatory.

Canada’s practices are a diluted version of those in the US. Just one province—Québec—enforces mandatory unit pricing in stores that use optical readers (where prices are displayed on the shelf, not on individual items, as is often the case in grocery stores, for example). In other provinces, the practice is voluntary. The problem in Canada is that pricing policies fall under provincial jurisdiction. There is only one policy over which the provinces and two federal agencies, the Competition Bureau and the Canadian Food Inspection Agency share jurisdiction: “price accuracy.” In other words, the Canadian government cannot implement binding national regulations of the kind adopted in Australia without the agreement of the ten provinces.

In any case, the effectiveness of regulations will remain limited until governments decide to enforce them more rigorously. Even though the Australian regulation is mandatory, a government-commissioned survey found that 47% of retailers do not meet the code’s requirements. “Despite UP being mandatory in Quebec, consumers there still experience the same problems consumers have in other provinces where UP labelling is voluntary,” says Jay Jackson, “like readability, visibility, accuracy, format, displaying UP on sales items and so on. The major difference is the breadth of products that bears UP shelf labels. For example, UP is applied in Quebec SAQ and pharmacies (non-food items) but is not commonly or routinely applied to these products in the rest of Canada.”


For a tougher voluntary approach  

Given the difficulty of creating a regulation applicable across Canada, Jackson recommends a more normative solution that would incorporate practices already in use.

Apart from the Quebec regulations, there are two international standards cited in the study, NIST and ISO, that would serve as the basis for a national standard in Canada that retailers, with the encouragement of governments, could adopt. This might be the most realistic approach.”

Jay Jackson

The idea would be to build on practices that are already in place. Jackson notes that a voluntary system is already being followed in some major banners in Canada. “They’re using the same system as in Quebec or in the case of the American chains, the same as in the United States. Our survey and our focus groups confirm that the practice is common in Canadian grocery stores.” The creation of a national standard would permit practices to be standardized and encourage other retailers to adopt their own unit pricing policies based on official recommendations.

While aiming to be realistic, Jackson is aware that, given the absence of legislative will, voluntary codes are a second-best choice. His study repeatedly refers to the example of the Retail Council of Canada’s “Voluntary Code on Optical Price Reading.” Such a code has many limitations, since it is up to consumers to enforce their rights, and government controls are virtually non-existent.

In Canada’s current voluntary framework, Jackson’s study concludes that the governments of Canada and the provinces (with the exception of Quebec) are showing no leadership or interest in improving unit pricing practices or promoting industrial codes of practice, or even in providing any form of public education.

This last point—educating consumers about unit pricing—is particularly critical. “The literature is fairly clear that consumers will benefit from clear, accurate UP labelling. However, UP does not work well unless consumers are informed as to how to find and use UP labelling. Consumer education is almost as important as the actual labelling.”

The study

“Unit Pricing: Time for a National Approach?”  (Council of Canadian Consumers, May 2019) examines the feasibility of developing a national unit pricing policy that would enable consumers to easily compare prices, regardless of format.

Based on a survey of 2000 respondents from every province and six telephone focus groups around Montreal, Toronto and in Alberta, the study reveals that consumers consider the practice of unit pricing to be very useful (96%) and believe everyone should have access to it (91%). To better assess the Canadian situation, author Jay Jackson compares the systems in other parts of the world (Australia, the United States and the European Union).

In Canada, only Quebec has established mandatory unit pricing regulations. Elsewhere in the country, the practice is voluntary. It would be very difficult for Canada to follow Australia’s lead in implementing a mandatory national unit pricing policy since pricing policies fall under provincial jurisdiction, which would require the agreement of 11 governments.

Nevertheless, it would be possible for governments to encourage the adoption of a national standard and promote consumer education on unit pricing. This last point would be an essential condition for any national pricing policy to succeed.