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What Mamdani Can Learn from other U.S. Public Grocery Projects, Past and Present
New York City mayor-elect Zohran Mamdani ran on a pledge [ [link removed] ] to pilot one city-run grocery store in each of New York’s five boroughs. Mamdani says these stores could provide lower cost food to combat rising grocery prices, particularly in working class neighborhoods left behind by full-service grocery stores.
Many [ [link removed] ] critics [ [link removed] ] say [ [link removed] ] public grocery stores are a radical, socialist fantasy [ [link removed] ], but New York City [ [link removed] ], other municipalities, and the federal government have a long history of running public food markets [ [link removed] ] and grocery stores [ [link removed] ]. Public grocery stores have the potential to improve food access and keep private price-gouging in check by creating a new low-cost competitor without a profit motive. However, without scale and fair pricing policies, some recent public grocery efforts have failed. Looking to models like the military commissary system and enforcing laws like the Robinson-Patman Act will improve New York’s chances for success.
Nearly 19 million Americans, or 6% of the U.S. population [ [link removed] ], live in low-income communities without an easily accessible grocery store. And many who have a place to buy groceries increasingly cannot afford to. Grocery prices are up nearly 30% [ [link removed] ] since February 2020, and 13.5% [ [link removed] ] of Americans struggled with food insecurity in 2023, according to the latest USDA data [ [link removed] ].
Consolidated, private grocers and food corporations have been accused of abusing consumers’ inflation expectations to increase their profit margins [ [link removed] ]. Such “greedflation” could be harder to pull off if private grocers had to compete with a public, not-for-profit option. Government-owned grocery stores can also serve communities where private stores cannot or will not [ [link removed] ].
American cities used to play a more direct role in food retail. Through the 19th century, cities built public markets [ [link removed] ] where food hawkers and farmers could rent stalls to create a more accessible, sanitary, and efficient alternative to street vendors. Many of these markets still exist, including Seattle’s Pike Place Market, Boston’s Quincy Market, and New York’s Essex Market. A longstanding produce store in the Essex Market, Viva Frutas, told [ [link removed] ]The New York Times [ [link removed] ] that it’s able to keep prices lower for its predominantly low-income clientele because the city offers it below-market rent.
Before the Great Depression, surveys indicated [ [link removed] ] that consumers preferred the prices and variety of food at public markets to those of private food retailers. That changed through the Great Depression and post-war period, as government investment in public markets waned and the supermarket model came to dominate food distribution and retailing.
Maintaining a market where vendors can rent low-cost space is a different public project than maintaining a grocery store. But we know the latter can be done effectively, because as long as there have been private self-service grocery stores, there have been government-run grocery stores [ [link removed] ] for military families and veterans.
The Defense Commissary Agency (DeCA) runs 178 stores in the U.S. and 57 stores abroad [ [link removed] ] that sell groceries for roughly 25-30% less than conventional U.S. stores, saving military families an estimated $1.6 billion per year [ [link removed] ]. The commissary system benefits from economies of scale and federal negotiating power [ [link removed] ] to buy goods at a low price [ [link removed] ]. Then the DeCA sells these goods to military families for just 5% more than what they paid for them, compared to a typical grocery store, which marks up goods around [ [link removed] ] 30% [ [link removed] ].
DeCA can keep its markup so low because taxpayers subsidize some of the commissaries’ operating costs, notably store labor. The federal government spends $1.2 billion [ [link removed] ] annually on DeCA operations and labor (approximately $5 million per store). Policy makers argue that this subsidy is worth the cost to provide additional benefits to service members.
Large cities and small towns alike are increasingly interested in offering public groceries to all residents, particularly in communities that cannot attract or maintain private grocery stores. More city leaders believe that directly owning and leasing grocery real estate can better ensure food access than tax incentives [ [link removed] ] to lure private grocers, roughly 70% of which end up funding projects that would have happened anyway, according to one study [ [link removed] ].
The City of Atlanta collaborated with a private operator [ [link removed] ] to open a grocery store in September [ [link removed] ]. Madison, Wisconsin, is working on [ [link removed] ] leasing a store [ [link removed] ] to an independent operator. Small towns and school districts in Florida [ [link removed] ], Kansas [ [link removed] ], and Nebraska [ [link removed] ] have opened or taken over grocery stores to ensure residents can buy fresh foods without having to drive long distances to the nearest chain store.
Unfortunately, the track record for more recent public grocery projects is mixed, at best. A grocery store in a municipally owned shopping center in Kansas City, Missouri, closed earlier this year [ [link removed] ] after losing 70% of its customers; the non-profit operating the store blames crime [ [link removed] ] and insufficient city support [ [link removed] ]. Well-publicized public grocery stores in the small towns of Baldwin, Florida [ [link removed] ], and Erie, Kansas [ [link removed] ], also closed within five years of the towns taking them over.
Another small town in Kansas, not far from Erie, has managed to keep the city-owned St. Paul Market open for more than 10 years [ [link removed] ]. Notably, the shuttered Erie Market had to compete with a Dollar General across the street [ [link removed] ], whereas the St. Paul Market does not.
Small public grocery stores face many of the same challenges as small independent grocery stores. After all, cities have not subsidized their public grocery stores as much as the military does. At most, cities fund construction or renovation and charge low to no rent while waiving taxes. Smaller public grocery stores ultimately struggle [ [link removed] ] to buy goods at fair prices and compete with large chains, even when the government is involved. An investigation by ProPublica [ [link removed] ] found that the steep difference in wholesale prices offered to publicly subsidized grocers versus large big box stores made it hard for publicly supported grocers to compete and contributed to their failure.
Part of the issue is simply numbers. Grocery chains need some economies of scale to buy in more efficient, lower-cost volumes, such as by the truckload. Five stores in America’s largest city will be a better start than one store in a small town like Baldwin, but it’s a far cry from DeCA’s 236 stores. Experts [ [link removed] ] estimate [ [link removed] ] that New York would need around 20 stores to really become price-competitive.
Former vice president of grocery for Whole Foods, Errol Schweizer, argues [ [link removed] ] that New York’s public grocery stores could buy in higher volumes if they carefully limit selection, like an Aldi. Aldi stores stock between 1,400 [ [link removed] ] to 2,000 [ [link removed] ] different products, while traditional grocery stores often stock more than [ [link removed] ] 30,000 [ [link removed] ]. By driving more volume to fewer items, public stores can buy in bulk.
Even if public grocery efforts limited their selection and took other steps to pool food procurement or join buying clubs to reach better economies of scale, they still might not be able to compete on price with dominant chain stores because of rampant price discrimination.
Small public [ [link removed] ] and private [ [link removed] ] grocery operators alike complain that powerful buyers such as Walmart, Kroger, and Dollar General are able to extract special prices from suppliers that they cannot access, even when buying in bulk. An existing law, the Robinson-Patman Act, technically bars dominant retailers from abusing their market power to demand special pricing, terms, and services, but it is rarely enforced.
The Robinson-Patman Act states that any differences in pricing or promotions must be based on demonstrable cost savings of serving one customer over another. The Federal Trade Commission brought two [ [link removed] ] new [ [link removed] ] lawsuits to revive Robinson-Patman enforcement during the Biden administration. The Trump administration withdrew one of these suits, and the other is making its way through the courts [ [link removed] ]. In the meantime, cities interested in public grocery projects should also look at their municipal or state-level authority [ [link removed] ] to enforce the Robinson-Patman Act or similar fair-pricing laws if they want their public stores to succeed.
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What We’re Following
The White House is investigating [ [link removed] ] dominant beef packing corporations for price-fixing and other antitrust violations. Will this effort hold packers to account where previous have not [ [link removed] ]? Advocates also want to see the Trump Administration uphold new Packers and Stockyards rules [ [link removed] ] that protect farmers from meatpacker deception and retaliation. Last month, a USDA official publicly disparaged [ [link removed] ] these rules and said their implementation is on hold. (New York Times/Meatingplace)
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