Grocery Update #147: Three Ways New York’s Public Grocery Experiment Could Fail.

The Mamdani Administration’s Pilot Faces Structural Dangers That Have Nothing To Do With Whether Public Groceries Are A Good Idea.

Three Ways New York’s Public Grocery Experiment Could Fail.

Commissioned By The NYC Policy Forum.

By Errol Schweizer & Raj Patel

As Bloomberg reported in February, the Mamdani administration has begun scouting sites for city-backed grocery stores across all five boroughs. The proposal—five publicly owned stores on city land, exempt from rent and property taxes, with an initial appropriation of $70 million channeled through the Economic Development Corporation (EDC)—is the most ambitious municipal food-provisioning experiment the United States has seen in decades. And given the soaring costs of groceries in New York City, the program cannot come soon enough.

A No Kid Hungry poll conducted in early February 2026 found that 67 percent of New Yorkers had been forced to choose between buying nutritious food and paying for other essential household expenses in the preceding year. That figure rises to 74 percent for families with children. Eighty-six percent of respondents said food prices were increasing faster than their income, and this was before the Trump administration launched a war with Iran, sending food prices higher yet. Given this untenable situation, the case for public intervention in the city’s grocery market is overwhelming.

The road ahead, however, is perilous, and the political stakes are enormous. Already, critics like the Food Industry Alliance trade group, the billionaire supermarket magnate John Catsimatidis, and the editorial board of the New York Post have summoned the ghost of Kansas City’s Sun Fresh—a city-backed grocery store that absorbed roughly $29 million in public investment over a decade before shutting its doors in August 2025—as proof that government has no business in the grocery aisle. Failure in New York would hand opponents of public food provisioning a generational talking point, one that would echo not only in city councils considering their own pilots but also in the federal legislative battles over SNAP, school meals, and public procurement.

What follows is a prospective diagnosis: three structural mistakes that could derail the initiative before it has a chance to prove itself. None of these are inevitable. But given the prevailing incentives and institutional defaults, each is likely to occur unless the administration acts deliberately to avoid them.

3. Outsourcing to Private Operators

The first and most seductive trap is to hand operations to a private grocery company. The logic is understandable: the city has no institutional experience running a supermarket, and private operators can offer turnkey expertise in supply-chain and assortment management, labor scheduling, perishable-goods logistics, and regulatory compliance. Several cities that have attempted public or quasi-public grocery interventions have taken this route. Kansas City’s Sun Fresh was operated first by a for-profit grocer, then by Community Builders of Kansas City, a nonprofit. Similarly, a grocery store in Baldwin, Florida, backed by USDA Community Facilities Program funds, opened in 2022 but was shuttered by 2024, and it too relied on private operators. The Kansas City model forced a nonprofit to bear costs that were properly the city’s, such as police patrols and sewer repair, and then everyone acted surprised when the nonprofit couldn’t bear them.

A private or nonprofit operator, however well-intentioned, faces a set of financial imperatives—covering payroll, maintaining margins, servicing overhead—that are fundamentally different from the imperatives of a public institution. When conditions deteriorate, a private operator’s rational move is to cut losses. A public institution, by contrast, can absorb short-term losses in the service of a longer-term mandate, provided that mandate is politically and fiscally durable. The private-operator model also separates the entity bearing the risk (the operator) from the entity bearing the responsibility (the city), and when the gap between risk and responsibility widens, the operator walks and the city is left with a shuttered building and a betrayed community.

The danger for the Mamdani administration is that the EDC, an entity whose institutional culture is oriented toward public-private partnerships and developer deal-making, will default to a private-operator model because that is what it knows how to do. But a public grocery store operated by a private company is not a public grocery store. It is a subsidized private grocery store, with all the vulnerabilities that arrangement entails: profit-extraction through management fees, opaque cost structures, and contractual exit clauses that leave the city holding an empty building. Worse yet, privately operated stores provide no mechanism for building the institutional knowledge that would allow the city to operate stores at scale in the future. If the pilot succeeds, the city needs to know how it succeeded in sufficient operational detail to replicate it. If it fails, the city needs to know why, in sufficient operational detail to diagnose the problem. This level of information is unlikely to be provided by private operators, as they are bound by confidentiality agreements and proprietary contracts, rather than guided by institutional transparency.

This does not mean that the city must do everything itself from day one. But the operational architecture must be designed so that the knowledge, experience and capacity flows toward the public sector over time, not away from it. The model to study is the Defense Commissary Agency, which operates 236 grocery stores on military installations worldwide with an annual congressional appropriation of roughly $1.4 billion, generating approximately $4 billion in annual sales. DeCA stores are publicly staffed, publicly managed, and sell groceries at cost (plus a congressionally mandated 5 percent surcharge earmarked for construction and modernization). A 2017 GAO analysis found that customer savings ranged from 5 to 25 percent depending on the local cost of living, with a global average of 23.7 percent—a figure Congress has mandated the agency maintain. While DeCA is not a perfect analogy for a municipal grocery system, it demonstrates that public operation of grocery retail is not a fantasy. It is a functioning, auditable, seventy-year-old institution serving millions of families.

2. Assuming the Wholesale Market Will Cooperate

The second mistake is to assume that a five-store pilot can secure wholesale pricing competitive with what major chains pay. It cannot, as the program is simply too small. In the contemporary American grocery supply chain, scale is not merely an advantage; it is the primary determinant of wholesale cost.

The wholesale grocery market is best understood not as a competitive marketplace but as a system of structured price discrimination. In December 2024, the Federal Trade Commission sued Southern Glazer’s Wine and Spirits, the nation’s largest alcohol distributor, alleging that it charged small independent retailers systematically higher prices than large national chains for identical products. In January 2025, the FTC filed a parallel suit against PepsiCo, alleging that the beverage company had constructed a deliberate “price gap” between Walmart and its competitors—raising wholesale prices for non-Walmart retailers, reducing their promotional support, and withdrawing marketing dollars from any competitor that threatened Walmart’s pricing advantage. When the complaint was partially unsealed in December 2025, the Institute for Local Self-Reliance described the newly visible details: PepsiCo had been systematically funding Walmart’s promotional displays and price reductions while cutting identical support to competitors and raising wholesale prices for non-Walmart retailers who tried to close the gap. Meanwhile, a class action filed in February 2025 by independent retailers alleged that PepsiCo sold Frito-Lay snack chips in grocery channels at prices 43 to 46 percent lower than in convenience store channels.

These cases are not outliers. They describe the structural condition of the American grocery supply chain after four decades without Robinson-Patman enforcement. The Act, passed in 1936 to prohibit discriminatory pricing between competing purchasers, went essentially unenforced from the early 1980s until 2024. During that period, independent grocers’ market share fell from over 50 percent to roughly 25 percent. And while there is some renewed bipartisan interest in reviving the enforcement of Robinson-Patman, for the purposes of the Mamdani pilot, the wholesale pricing environment must be taken as it is, not as reformers hope it will become.

For five stores buying in a market structured to reward scale and punish its absence, the wholesale prices available will be substantially higher than what Walmart, Kroger, or Costco pay for identical products. The industry rule of thumb, as the American Prospect reported in its October 2025 analysis of the Mamdani proposal, is that most grocery retailers operate on roughly 40 percent markups from wholesale. But this markup that customers receive as the retail price is itself a function of the wholesale costs the retailer secured, which in turn depends on its purchasing volume. As Claire Kelloway of the Open Markets Institute observed, Walmart’s dominance rested on “bullying, bludgeoning, ruthlessly negotiating with suppliers, because they have access to this market that is so big, and suppliers really can’t afford to not be on Walmart’s shelves.” A new public entrant buying for five stores cannot replicate those terms.

This does not doom the pilot. But it means that the administration cannot treat procurement as a technical detail to be sorted out after the stores are built. Procurement strategy is the strategy. One lesson from the private sector is instructive: at Whole Foods Market, higher sales volumes meant lower wholesale markups on many non-perishable products. Such contracts were negotiated before the Amazon acquisition, when the company was still operating as an independent grocer, and were in turn a key driver of its growth and its ability to achieve net income margins of 2 to 3 percent. If the city is going to pass along meaningful savings to customers as lower shelf prices, it should aim to find specific areas where it can outperform standard wholesale pricing.

The administration should also consider whether the pilot’s procurement architecture could serve as the nucleus of a broader municipal purchasing cooperative—aggregating demand not only across the five stores but across the city’s school meals program, public hospitals, senior centers, summer feeding programs, and corrections facilities. New York City already spends hundreds of millions of dollars annually on institutional food procurement. Consolidating that purchasing power into a single negotiating entity would fundamentally alter the wholesale dynamics. But this infrastructure must be designed for aggregation from the outset, not retrofitted after the pilot is already locked into a procurement model built for five standalone stores.

The wholesale problem must be understood against the backdrop of an intensifying federal assault on the food-assistance programs that sustain demand for groceries in the very neighborhoods the pilot is meant to serve. The reconciliation law signed on July 4, 2025, cut roughly $187 billion from SNAP over ten years—the deepest reduction in the program’s history. The Congressional Budget Office estimates that 2.4 million people will lose food assistance in an average month: 800,000 adults aged 55 to 64, 300,000 parents and caregivers with children 14 and older, roughly one million people in areas with scarce employment, and more than 300,000 veterans, people experiencing homelessness, and former foster youth. For the first time, states will be required to share in the cost of SNAP benefits, a structural shift that CBO projects will cause some states to reduce eligibility or benefit levels. When Medicaid cuts in the same legislation—$863 billion over a decade—force patients into choices between medication and food, the compounding effect on household food budgets in low-income neighborhoods will be severe. Public grocery stores that open into a landscape of contracting food-assistance dollars will face a demand environment that no procurement strategy alone can address. The administration will need sustained public pressure to resist the austerity tide—and the stores themselves must be understood as part of that resistance, not as a substitute for it.

1. Demanding Budget Neutrality

The third mistake is the most politically intuitive, as well as the most dangerous: requiring that the public grocery pilot pay for itself. The Mamdani administration faces a $5.4 billion budget gap, which the mayor has largely attributed to the fiscal legacy of the Adams era. The proposed paths to closing it—either pressuring Albany for higher taxes on the wealthiest residents and corporations, or imposing a 9.5 percent property tax—are both politically fraught. In that environment, the temptation to promise that public groceries will be self-sustaining, that they will generate enough revenue through sales to cover operating costs without ongoing appropriations, is enormous. It is also a trap.

Budget neutrality imports a private-sector logic into a public institution and then judges the institution by criteria it was never designed to meet. The correct question is not whether the stores cover their costs through sales revenue, but whether the public expenditure required to operate them is justified by the public goods they produce—measured in lower food costs for residents, improved dietary outcomes, reduced reliance on emergency food systems, neighborhood economic activity, direct employment, and the disciplinary effect on private grocery pricing in the surrounding market.

The DeCA model is again instructive. Military commissaries receive an annual congressional appropriation of approximately $1.4 billion, covering personnel and operations. They then sell groceries at cost plus the 5 percent surcharge. The system generates roughly $4 billion in annual sales and delivers estimated savings of 25 percent to its patrons. No serious person describes DeCA as a “failed” program because it requires an appropriation. The appropriation is the mechanism through which the public benefit—lower food costs for military families—is delivered. It is not a subsidy in the pejorative sense. That simply is the program.

New York’s public grocery stores should be understood in the same terms. An ongoing appropriation is not a sign of failure; it is the instrument of the policy. The relevant comparison is not between the stores’ operating costs and their sales revenue, but between the cost of the appropriation and the cost of the status quo. The city already subsidizes corporate supermarkets through tax abatements, zoning incentives, and the Food Retail Expansion to Support Health (FRESH) program. The cost of diet-related chronic disease in the Medicaid system is immense. The economic costs of food deserts—lower property values, reduced commercial activity, the hours that residents in underserved neighborhoods spend traveling to distant stores—are real if diffuse. The city already pays for the absence of affordable groceries. The question is whether it is willing to pay, more transparently and more efficiently, for their presence.

This does not mean the stores should be indifferent to their financial performance. Operational efficiency matters: it determines how far the appropriation stretches and how low prices can go. But the standard should be performance relative to mandate, not performance relative to breakeven. A public grocery store that requires a $2 million annual appropriation but delivers $8 million in consumer savings, provides sixty unionized jobs, and anchors a neighborhood commercial corridor is not a drain on the budget. It is one of the better investments a city can make.

0: The Stakes Beyond the Pilot

By design or circumstance, the Mamdani administration has placed the public grocery imitative at the center of national attention. As a result, the initiative now represents a significant contest over the role of government in American economic life.

The conservative project in food policy, from the Reagan era forward, has been to use food insecurity as a disciplinary instrument against working people. The 1981 omnibus budget act cut food stamps by $2 billion and tightened eligibility; the 1996 welfare reform imposed time limits and work requirements on the program; and the 2025 reconciliation law cut SNAP by roughly 30 percent over a decade while extending trillions in tax benefits to corporations and the wealthiest households. Food banks and emergency food systems—themselves a Reaganite legacy, created to absorb the human consequences of benefit cuts while leaving the structures of inequality intact—have become the default infrastructure of American food assistance. They depend on industrial overproduction, surplus disposal, and private philanthropy rather than on any affirmative vision of what people should eat or how communities should be provisioned.

Public groceries are a departure from both poles of this politics. They are not conservative austerity, which asks the poor to bear the cost of their own deprivation. And they are not liberal philanthropy, which addresses deprivation through private charity while leaving the structures that produce it intact. Public groceries propose something categorically different: that the provisioning of food is a legitimate function of government, that the public sector can operate supply chains oriented toward values—nutrition, affordability, fair labor, ecological sustainability, support for regional producers—rather than toward shareholder return, and that the relationship between government and the food system should be redesigned from the ground up, not merely patched through subsidies to incumbent processors and retailers or rescued through food-waste diversion to charitable pantries.

This is why failure matters so much. If New York’s pilot is undermined by the structural traps described above—if the stores are handed to private operators who cut and run when conditions tighten, if procurement is botched because no one reckoned with wholesale pricing, if the program is strangled by a budget-neutrality requirement that no equivalent public institution, from the commissary system to the public library, is asked to meet—the damage will not be confined to five buildings in five boroughs. It will set back the movement for public food infrastructure across the country by a decade or more, at precisely the moment when federal policy is making that infrastructure most urgently necessary.

Two-thirds of New York City residents told pollsters they support the creation of municipal grocery stores. The question is whether the political will that produced that mandate can be sustained through the grinding, unglamorous work of getting the institutional design right—the procurement contracts, the labor agreements, the site selection, the appropriations framework, and the public accountability mechanisms that will determine whether these stores are built to last or built to be a cautionary tale. The Mamdani administration has $70 million and the attention of the country. The margin for error is narrow. And the cost of getting it wrong will borne by the families who were promised something better.

(Note: Thanks to Raj for taking 500 words of my notes and concepts written while I was managing my wife’s hospice care, adding key insights and drafting much of the text above. -Errol)