City-Run Supermarkets Aren’t New. But No One’s Tried Them in a City Like New York | Company Business News

(Bloomberg) — For decades, the American playbook for bringing groceries to underserved neighborhoods has been simple: offer tax breaks to supermarket chains and hope they sign up.  But as food costs climb and public trust in private solutions falters, a supermarket model with government at the center is moving from fringe idea to policy experiment.

Nowhere is the potential impact greater than in New York City, where Democratic mayoral candidate Zohran Mamdani wants to test a city-run grocery store in each of the five boroughs at a projected cost of $60 million. But New York isn’t the only place where alternative models are emerging.

Atlanta is set to open two grocery stores later this year through a public-private alliance backed by an $8 million grant and operated in partnership with regional chain Savi Provisions. The stores are slated for so-called food deserts, where availability of fresh, affordable food is scarce. 

City officials chose a public-private model not just for long-term sustainability but because the existing development incentives didn’t encourage the private sector to step up, according to Laurie Prickett, a senior vice president at Invest Atlanta, the city’s economic development arm. If successful, Atlanta plans to expand its model, aiming to place every resident within a half-mile of fresh food by 2030, she said.

Government-supported grocery models aren’t a new idea. They’ve taken the form of nonprofits, co-ops, military-base commissaries, public-private partnerships, and municipally owned and operated stores — with varying results. 

Boston’s Daily Table, a nonprofit grocery chain launched by a former Trader Joe’s president, announced its closing in May after a decade of trying to sustain its mission of providing affordable food. While its funding came from a variety of sources, federal cuts to food aid programs catalyzed its demise. In Baldwin, Florida, a town-owned market folded for similar reasons. 

But in rural St. Paul, Kansas, which had been without a grocery retailer for more than 20 years before a public-private partnership opened a supermarket in 2008, the local government doubled down on its investment and became the store’s sole owner in 2013.

A major difference between the models in other American cities and Mamdani’s proposal is the scale: Baldwin has fewer than 1,300 residents; Atlanta is home to around 520,000, not far behind Boston’s 673,000. New York City, meanwhile, has an estimated population of 8.48 million.

Also, Mamdani isn’t proposing to have private operators run the stores. The enterprise would be fully owned by the city, which would sell the groceries at cost and source products from neighborhood suppliers where possible.

Supporters of Mamdani’s pilot program call it a bold solution for New Yorkers struggling to afford the basics. Critics warn of government overreach and unintended consequences, including harm to neighborhood bodega owners. 

Others question whether New York’s bloated bureaucracy is even capable of running grocery stores. Supply chains are complex, operating costs are high and profit margins are thin. Even if city-run stores aim to break even at best, the savings for shoppers might be modest, said Sara John, who leads the Center for Science in the Public Interest’s work on federal policy and the private sector.

John doesn’t view city-run grocery stores as a silver bullet but sees potential in a model accountable to consumers, not shareholders. “Prioritizing people over profits could make a difference,” she said, though she emphasized that execution would be challenging.

Mamdani’s plan comes after grocery costs in the city jumped nearly 9% in 2022 — the highest in 40 years — and climbed again in 2023, while wage growth failed to keep pace, putting basic necessities out of reach for a growing number of residents. The financial strain is turning political; a recent poll found that nearly two-thirds of New Yorkers, including majorities across political lines, support the idea of city-run stores.

Funding for Mamdani’s proposed plan largely relies on raising taxes on New York’s wealthiest one percent and additional corporation tax. The city already spends millions on FRESH, a program launched in 2009 to tackle the lack of neighborhood grocers in select communities. There are now more than 50 FRESH-supported stores that are open or in development and receive a mix of zoning benefits and tax breaks. But a report from the comptroller’s office found the program’s impact on food access has been limited at best. 

Mamdani has jumped on those findings, criticizing the program for having little accountability for affordability, labor standards or acceptance among those eligible for food assistance.

“There’s no guarantee those groceries are cheaper,” he said in an interview with Bloomberg’s Odd Lots podcast in May.

Benjamin Lorr, author of The Secret Life of Groceries, which examines the human labor that goes into the industry, said the idea of city-run stores may sound radical but is a natural response to deep imbalances in the current grocery market.

If the market is failing to provide basic goods affordably and equitably, it’s not unreasonable for the public to step in, Lorr said. “The question is: Can it be done well? Is the juice worth the squeeze?”

Much of the criticism of Mamdani’s plan comes because it risks threatening existing businesses, which have been pressured to increase prices due to rising costs. Bodega owners, for example, worry they could be undercut by city-run groceries, which under Mamdani’s proposal wouldn’t have to pay rent or city license fees. 

A spokesperson for Mamdani said the new stores would be placed in food deserts, where there isn’t existing competition — but the genuine existence of true food deserts in the city is debated. 

Isabella Weber, an associate professor of economics at the University of Massachusetts Amherst, was one of 30 progressive economists (including Yanis Varoufakis) who signed a letter backing Mamdani’s policies, and sees municipally-run grocery stores not as a cure-all, but as a necessary experiment amid what she calls an “affordability crisis” engulfing food, housing and childcare. This crisis, she said, is further exacerbated by overburdened food banks amid the eroding safety net of the Supplemental Nutrition Assistance Program (SNAP), which will face deep cuts under Trump’s One Big Beautiful Bill Act.

“These are things where you can’t say, ‘I’m not in the mood of eating today,’” Weber said. “They’re necessities of life.”

A public store could reduce prices by eliminating markups, using public land and applying subsidies, she said. If scaled, it might also force private grocers to lower prices. “But that’s a big ‘if,’” she said.

An alternative use of the funds could rely on a model seen in Mexico, where the government negotiated with major grocery chains to cap prices on essential goods. India has taken a different approach too through fair price shops, which offer high-calorie foods at subsidized rates.

The Venezuela Comparisons

The mayoral candidate’s idea has prompted sharp warnings from local supermarket operators. John Catsimatidis, owner of the Gristedes and D’Agostino grocery chains (and a former Republican candidate for New York City mayor), threatened to leave the city if Mamdani is elected and warned of “Soviet bread lines” if the plan goes forward. “Everything Mr. Mamdani is suggesting was already done by Hugo Chavez in Venezuela and Fidel Castro in Cuba,” Catsimatidis wrote in an opinion piece for the Wall Street Journal.

Comparing the plan to Venezuela, whose food crisis is a cautionary tale of state-controlled food systems gone awry due to corruption and economic collapse, is not unique to the billionaire. 

Francisco Rodríguez, a former economic advisor to the United Nations and longtime researcher of the Venezuelan crisis, said there are lessons to learn from the country’s approach to operating city-run stores. While the Chávez government’s subsidized food stores initially helped reduce hunger and shore up political support, the model unraveled when oil prices collapsed and the country could no longer foot the bill, leading to extreme hunger.

“Those stores worked while the government was riding high on oil prices. Once that revenue fell — first from market forces, then sanctions — it couldn’t keep subsidizing food, and the whole system collapsed,” said Rodríguez, now a public affairs professor at the University of Denver.

New York, he said, would also have to contend with other problems that Venezuela faced, including exploitation of the subsidies by people who didn’t need cheaper groceries and black markets that flourished as people bought products to resell.

“Most economists, and I would concur, say that universal subsidies aren’t the most efficient use of public funds,” Rodriguez said. “You end up helping people who don’t need it.” Instead, he recommends targeted support that delivers food directly to needy families, expansion of other programs to those near poverty and social policies to support the middle class.

For now, Mamdani’s proposal is still just a proposal. If he’s elected in November and able to enact his plan, the pilot stores will become an important case study for democratic socialists. But their success will depend less on ideology than on execution.

“It’s about trying, piloting, and seeing what works,” said Weber, the UMass Amherst professor. “If it works, it can be scaled. If not, at least we’ve learned something valuable.”

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