Grocery Update #129: How Public Grocery Stores Could Work In Canada.

As Canadian as hockey, poutine and Celine Dion.

How Public Grocery Stores Could Work In Canada.

TL;DR: Canada is a highly concentrated grocery market where prices have skyrocketed. A public grocery sector could work if it scales up for low wholesale costs; keeps the assortment slim, and prioritizes local Canadian suppliers; and fully subsidizes the retail markups, inclusive of labor, administration/IT, utilities, shrink, taxes and rent. Such a model could save northern Canadians up to 45% and urbanites up to 30%.

By Raj Patel, Aaron Vansintjan, Anna Paskal and Errol Schweizer

Written For The Canadian Centre For Policy Alternatives.

Chances are you spent some of your holiday gatherings talking about the price of food. Costs to consumers have increased by almost 30 per cent since 2020, while mega-grocers doubled their profit margins, and total profits ballooned by over 120 per cent. The growing distrust of Canada’s oligopolistic food retail system, where five large chains control 80 per cent of the market, has prompted thinking outside the corporate big box store.

One headline-grabbing proposal that has gained prominence over the past year is to open government-run low-cost grocery stores.

New York City Mayor Zohran Mamdani popularized the idea when he campaigned on city-run stores in every borough. Meanwhile, here in Canada, NDP leadership hopeful Avi Lewis made a “public option” for groceries a centerpiece of his campaign, and a Food Secure Canada analyst partnered with The Breach to make a viral video about public grocery stores.

What recently seemed like an obscure proposal is rapidly becoming a topic du jour. The public’s response to the idea has been largely positive, although some national media voices have been critical. What we need now, is solid modeling.

A close look at international approaches and retail economics points to some helpful facts and lessons. Millions of people are already shopping at public grocery chains in Mexico and the United States.

Our analysis shows that a public grocery network across Canada could save families approximately 30-45 per cent off their grocery bill depending on where they live, the price tag is reasonable, and our governments have the experience to make it work.

Scale matters.

Recent examples have shown that small-scale approaches are problematic. In Florida, Kansas, and Illinois, municipal governments opened grocery stores after they had been abandoned by large chain grocers. All ceased operating within a few years.

This isn’t very surprising. Small public grocery stores in underserved areas struggle with the same challenges faced by independent family-run grocery stores and corner shop depanneurs in Canada: they rely on the distribution systems used by big retailers. As individual stores they have no comparative purchasing power, so they are easily priced out.

Large-scale public food provisioning tells a significantly different story. Mexico’s SuperISSSTE chain is a public grocer owned by the Mexican government that began in 1953 and is being reinvigorated after years of neglect. It currently runs 46 stores in urban centers nationwide, operating at volumes that give them the negotiating leverage needed to deal with suppliers. They prioritize Mexico-made goods, providing much-needed stability to local producers. Mexico also runs 24,000 Tiendas del Bienestar (Shops for Well-Being) servicing rural areas and run by the local community, supplied by a network of 300 warehouses, offering savings for staples of at least 15 per cent.

The U.S. military commissary system is a successful publicly owned global food retailer: it serves 8 million shoppers through 235 supermarkets on bases worldwide, offering savings of 23.7 per cent compared to commercial grocers. These savings are so high that U.S. veterans will often choose to live close to a military base after retiring, so they can keep shopping at the publicly run grocery store. Not only do they provide well-paying jobs, but suppliers love them, as they guarantee fair prices and stable contracts. This is particularly valuable for small and medium scale local food providers who are encouraged to invest in their businesses by the predictable demand. This well-functioning model uses scale to drive down costs and build food system resilience.

Similar to the U.S. commissary model, a more ambitious large-scale “Costco-plus-local” approach could work in Canada. This could be a warehouse-style chain (or network of smaller stores) that guarantees fair contracts with local and national suppliers, uses high-volume buying power to bring down wholesale costs, and further reduces prices through publicly subsidized labor and overhead. This could reduce grocery prices by approximately 30-45 per cent depending on where people live, be rolled out relatively quickly, and have a modest price tag. The key is that scale matters.

A modest price tag.

Based on our initial estimates, a scaled-up network of public grocers across the country would need a moderate up-front investment—one that would bewell within what governments are used to spending on public projects.

It would cost approximately $350 million for initial infrastructure to open 50 stores (40 in urban centers, 10 in remote regions), six distribution hubs, and run associated logistics. Annual operating costs, with government covering labor and overhead like rent, would be an additional $290 million—less than half the lifetime cost of one F-35 fighter jet. Canada recently cut a deal with the US to buy 88 of them.

The network could use direct purchasing from local food hubs and producers, competitive bidding to secure “everyday low pricing” from packaged food suppliers, centralized distribution, and logistics best practices. All the benefits could be passed on to the consumer, leading to reductions of between approximately 25 and 30 per cent in consumer prices in urban areas, and approximately 45 per cent for northern communities (where groceries currently cost double or triple southern prices). A family could save between $2,500-10,000 annually, depending on where they live. For example, with 210,000 families shopping per year (200,000 in urban centres, and 10,000 in the North), this would result in $600 million in savings.

In other words, after the initial modest investment in the buildout, for every dollar the government puts in annually, Canadian shoppers could save $2 in return.

A crucial strategy would be to combine the grocery network’s purchasing power with institutional procurement. Canada’s five year $1 billion investment in the National School Food Program—recently made permanent with a $216 million annual commitment—will fund significant quantities of food, but procurement currently relies largely on highly concentrated distributors. By partnering on some purchases with hospitals, universities, and other public and non-profit facilities, the network could have greater leverage and cost savings.

The benefits of a public option for groceries would also extend to other sectors of the Canadian economy. It would support Canadian farmers, fishers, ranchers, gatherers and businesses with stable contracts. It would be welcome in a trade war when shoppers are looking to buy Canadian. And more unionized well paid jobs raise standards across the country. In return for a modest government investment, the benefits to Canadians would be immediate and significant, as well as helping to build resilience into our food system for the long-term.

Governments can do this.

Canada already has public retail options. Provincial liquor stores generate billions in revenue and show that governments can successfully run retail operations at scale. Notably, these liquor stores have become a bulwark against U.S. bullying by taking U.S. products off the shelves, giving Canada a bargaining chip in trade negotiations. A public grocery store could do likewise.

Meanwhile, provincial-run cannabis stores demonstrated the government’s ability to roll out new retail infrastructure—and new supply chains—with remarkable speed. Within a year of legalization, provincial governments opened dozens of brick and mortar public cannabis stores across the country.

We also have precedents for rapidly dealing with Canada’s jurisdictional issues such as territorial agreements and budget transfers. In under a year after the initial budget announcement, the federal government signed National School Food Program agreements with all provinces and territories. These laid out combined federal/provincial commitments to shared national school food policy values and visions, where federal funding would go, who was responsible for management, and the number of meals to be served.We have the experience to pull this off with speed and at scale.

Responding to common objections.

The most common argument against public grocery is that it sounds like the government is taking control of food sales. This misunderstands the proposal, as private grocers would still operate. Instead, public grocery stores would add a competitive public option alongside existing stores to address market failures. What we have now—five chains controlling most of the market—is far from a competitive marketplace. A public grocery option would add another retailer to the mix, increase competition, and expand choice for consumers.

Another objection is that other policies would work better. The Globe and Mail suggested strengthening the Competition Act and easing barriers for international grocers to enter Canada. Yet the Competition Bureau hasn’t successfully blocked any of the 27 food supply chain mergers since 2001, and it’s hard to see how bringing in more mega grocers from abroad would fix the fundamental market failure of corporate consolidation. While more robust competition policy is a key part of the picture going forward, for-profit grocers will not deliver the kinds of price cuts that a publicly subsidized option can.

There’s also the critique that, since large retailers have low profit margins, the price savings in a public option for consumers would also be low. However in reality, a company like Loblaws, even with a profit margin of three to four per cent still makes total profits of over $2 billion that could be passed along to consumers as price savings. Additionally, a large-scale public grocer, with subsidized operating costs, good wholesale prices, and no shareholders to pay dividends to, could pass along even steeper discounts to families across the country.

The bottom line.

We are caught in a system where food is treated as a means for profit rather than as a human right, with wealth and power concentrated in the hands of a few mega corporations, leading to spiraling prices. Canadians are fed up with insufficient and ineffective government approaches to fix the situation. Meanwhile, families continue to face impossible choices at the checkout, and affordability is the defining issue of our times.

A public option for groceries offers real action. The $290 million annual cost is less than one per cent of Canada’s defence budget, and just over one per cent of what the federal government invests annually in infrastructure—yet it would likely reduce grocery prices throughout a network of stores by 30-45 per cent. As seen from examples in other countries, it can be done, and it is already being done.

Public grocery stores aren’t a panacea. They won’t solve food insecurity, which is caused by inadequate income, and requires urgent government action. But they can help with food affordability, strengthen local food production and Canadian food supply chain resilience, and provide well-paying jobs.

The question we should be asking isn’t whether this could work in Canada—it’s why it hasn’t been tried yet. And who is going to step up and make it happen?

(and here’s some poutine for the true believers.)

Raj Patel is a Research Professor in the Lyndon B Johnson School of Public Affairs at the University of Texas, Austin. He is a member of the International Panel of Experts on Sustainable Food Systems a member of the council of Progressive International, author of Stuffed and Starved: The Hidden Battle for the World Food System among other books and articles, and co-director with Zak Piper of the award-winning documentary The Ants & The Grasshopper.

Aaron Vansintjan is Policy Manager at Food Secure Canada and has worked as a consultant for non-profits and governmental bodies. He holds a PhD from Birkbeck, University of London and an MSc at McGill University and has written two books on environmental politics.

Anna Paskal is a food systems consultant who has worked with the United Nations, governments, national and international civil society, think tanks, philanthropy, academic institutions, and research institutions. Currently, she is Senior Advisor with UNDPs new Food and Power Initiative, and working with IPES-Food, Food Secure Canada and Food Communities Network.

Errol Schweizer has over 25 years of experience in the grocery industry, starting out as a clerk at Whole Foods, to scaling the national grocery department to US $5 billion, to working on municipal food policy in Austin. He publishes The Checkout Grocery Update, contributes to Forbes on food pricing, market dynamics and labor economics and is a member of IPES-Food.

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