What Mamdani Can Learn from Past and Present Public Grocery Projects

Photo by iStock/John Nilsson

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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 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 critics say public grocery stores are a radical, socialist fantasy, but New York City, other municipalities, and the federal government have a long history of running public food markets and grocery stores. 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, 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% since February 2020, and 13.5% of Americans struggled with food insecurity in 2023, according to the latest USDA data.

Consolidated, private grocers and food corporations have been accused of abusing consumers’ inflation expectations to increase their profit margins. 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.

American cities used to play a more direct role in food retail. Through the 19th century, cities built public markets 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 The New York Times 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 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 for military families and veterans.

The Defense Commissary Agency (DeCA) runs 178 stores in the U.S. and 57 stores abroad that sell groceries for roughly 25-30% less than conventional U.S. stores, saving military families an estimated $1.6 billion per year. The commissary system benefits from economies of scale and federal negotiating power to buy goods at a low price. 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 30%.

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 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 to lure private grocers, roughly 70% of which end up funding projects that would have happened anyway, according to one study.

The City of Atlanta collaborated with a private operator to open a grocery store in September. Madison, Wisconsin, is working on leasing a store to an independent operator. Small towns and school districts in Florida, Kansas, and Nebraska 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 after losing 70% of its customers; the non-profit operating the store blames crime and insufficient city support. Well-publicized public grocery stores in the small towns of Baldwin, Florida, and Erie, Kansas, 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. Notably, the shuttered Erie Market had to compete with a Dollar General across the street, 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 to buy goods at fair prices and compete with large chains, even when the government is involved. An investigation by ProPublica 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 estimate that New York would need around 20 stores to really become price-competitive.

Former vice president of grocery for Whole Foods, Errol Schweizer, argues 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 to 2,000 different products, while traditional grocery stores often stock more than 30,000. 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 and private 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 new 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. In the meantime, cities interested in public grocery projects should also look at their municipal or state-level authority to enforce the Robinson-Patman Act or similar fair-pricing laws if they want their public stores to succeed.

What We’re Following

The White House is investigating dominant beef packing corporations for price-fixing and other antitrust violations. Will this effort hold packers to account where previous have not? Advocates also want to see the Trump Administration uphold new Packers and Stockyards rules that protect farmers from meatpacker deception and retaliation. Last month, a USDA official publicly disparaged these rules and said their implementation is on hold. (New York Times/Meatingplace)

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