Public grocery stores are having a moment. Can they really make food more affordable?

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The Current19:24Can public grocery stores work in Canada?

From Toronto to New York City, politicians want to tackle rising food costs with government-run grocery stores.

In the model announced by New York City Mayor Zohran Mamdani, the city would cover construction expenses as well as rent and property taxes — ideally, with those savings passed on to shoppers — and lease to a private operator that would run the store.

Toronto city council recently passed a motion introducing a similar pilot program. The plan is scheduled to be presented next spring. Newly minted federal NDP leader Avi Lewis also made the push to establish a public grocer in Canada a key plank of his party leadership campaign.

Politicians championing the plan say these stores would sell staple items at lower prices than private grocery stores. But critics say the idea is half-baked and will only waste public money.

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Canadian grocery prices were up 5.7 per cent in February from a year ago, according to Statistics Canada. Canada’s Food Price Report forecasts that prices will increase four to six per cent this year. That means a family of four is expected to spend $17,571.79 on food, nearly $1,000 more than last year — and the report came out before the U.S.-Israeli war with Iran drove up global energy prices.

Food economist Michael von Massow says public grocery stores are not a silver bullet for inflation in grocery prices.

“Building stores and trying to run a business that is so dependent … on distribution, on efficiencies, and scale, I think we’re just going to be throwing money away without achieving the objectives that we’re trying to achieve,” he told The Current.

How to run a public grocery store

Von Massow, a professor with the University of Guelph’s Ontario Agricultural College, says governments lack the expertise needed to succeed in an industry with razor-thin profit margins.

The only way public grocery stores could compete, he says, would be if operational costs like labour or rent were subsidized. Toronto and New York City plan to cover these overhead costs.

But even then, he adds, a public grocer with a handful of stores can’t buy as efficiently as a company with thousands of locations. Grocery chains use their purchasing power to get better rates from suppliers.

Man with glasses stands with arms folded with trees in background — Michael von Massow is a professor in the University of Guelph’s department of Food, Agricultural and Resource Economics. (Submitted by Michael von Massow)

Rial Carver, the program director for Kansas State University’s Rural Grocery Initiative, which supports new grocery stores, says finding the right people to run a public grocery store is crucial.

“When you run on such thin profit margins, there’s not a lot of room for error,” she said.

The main models for running a public grocer are public-private partnerships or municipally owned operations, according to Carver.

In a public-private partnership, governments act like property owners that lease to a private partner to ensure essential services remain in the community.

Carver says these arrangements are more common, comparing it to a utility.

Woman wearing glasses — Rial Carver is the program director of the Rural Grocery Initiative at Kansas State University. (Submitted by Rial Carver)

One of the benefits of the government-owned model is that municipalities can invest in technical supports to ensure operators are reaching their benchmarks, like profit margins, Carver says.

She pointed to the St. Paul Supermarket in St. Paul, Kan., as a successful example of a city-owned market.

The market opened in 2008 thanks to public money and investments from volunteers. When the couple who bought the inventory and managed the store retired in 2013, the city bought it to prevent its closure.

The military commissary

Errol Schweizer, a former Whole Foods executive, says Canada should look to the U.S. military commissary model for public grocery stores.

In the U.S., military members and veterans can shop at stores on military bases called commissaries. The federal government subsidizes some labour, utilities and administrative expenses and sets prices, so groceries are about 25 per cent cheaper.

But Schweizer’s concerned that Toronto and New York City’s public grocery models don’t subsidize the full gross profit margin — that is, the overhead.

“The only thing that’s worked is the commissary model, not these public-private partnerships, not these partially subsidized models,” he said.

Man wearing black polo stands with hands in pockets in a grocery isle — Errol Schweizer is a former Whole Foods executive and grocery operations expert who focuses on supply chains. (Submitted by Errol Schweizer)

Schweizer co-authored a Canadian Centre for Policy Alternatives report about the possibility of bringing public grocers here. The report estimates it would cost about $350 million to set up a network of public grocery stores, plus around $300 million a year to operate.

He says while it’s a large sum, it’s only a fraction of Canada’s defence and infrastructure budgets.

“So, it’s really not a lot of money for what you get,” he said. “You gotta decide what your priorities are.”

‘Too focused on retail’

Gary Sands, vice-president of the Canadian Federation of Independent Grocers Policy and Advocacy, says focusing on who sells the food is a superficial way to look at the problem.

“That’s what the consumer and the politicians react to,” he said. “It’s pointing fingers and we don’t find solutions by pointing fingers.”

Governments should instead explore how to help reduce costs in the food supply chain, like creating regional distribution centres to lower transportation fees, Sands says.

Man in dark-coloured suit in front light-coloured backdrop — Gary Sands is vice-president of the Canadian Federation of Independent Grocers Policy and Advocacy. (Gold Media)

He would also like to see more support for independent grocers to make them more competitive. For example, large companies pay lower interchange or transaction fees to credit card companies and banks than independent grocers do for identical transactions. So, swipe fees are eating into independent grocers profits, Sands says.

“Lowering those fees doesn’t require any taxpayer support, so I put that at the top of my list.”

Government support for high food prices

Earlier this year, Prime Minister Mark Carney announced affordability measures that he said will help Canadians with the high cost of living.

The government’s groceries and essentials benefit, which will boost how much individuals and families get through their GST rebate over the next five years, will begin landing in Canadians’ bank accounts in July.

This June, eligible low-and modest-income individuals will get a one-time 50 per cent top-up to the GST rebate they received from July 2025 to June 2026. Then in July, the quarterly rebate will increase by 25 per cent — and stay there for the next five years.

Von Massow says incentives like these are more efficient.

“If we’re just going to subsidize it anyway, why not give money directly to the people that need it?”